Pension Options
Growing old is a part of life. It is as normal as the blooming and withering of flowers or the change of the season during specific months in a year. Yet, as natural as it may seem, aging has been a growing concern to people worldwide. Most of them would see this process as a hindrance that can hold them back from doing the things that they wanna do in the future. Some people also worry about the fact that old age also heralds the end of one’s career. Suddenly, they realize that it maybe the start of a harder life, especially that their main source of income is stopped.
"Where will I get money to support my lifestyle?" "Where will I get financial help for my health care needs?" Or worse, "Where will I get the money to buy my basic needs like food, shelter and clothing?" These are the questions that we somehow start asking ourselves. For most countries, government employees usually do not worry too much simply because the government can support them through retirement pension. Usually, retired pensioners receive a certain percentage of their salary to support their cost of living. However, it is important to note that not all companies would provide this as a benefit.
Then again, we do not have to worry if we work for private institutions. If our employers do not provide support after tenure, we can find means to providing work pensions for ourselves.
First of, what we have to know is that though pension is technically optional for private employers, most of the larger offices can actually set up a pension scheme for us. Our employers can make arrangements with a company pension to deduct 5% of our gross salary every pay day and add it up to their regular contribution. The idea is that they take off that certain amount to save it for us. Some people may dislike this arrangement because the scheme would also be mean lesser take home pay. Nevertheless, it would be wise to remember that the 5% that they deduct from our pay check does not go down the drain, they are actually keeping it for us for the rainy days. We may not have access to the money now but we can definitely get access to it in the future.
The amount that one gets from their occupational pension usually varies as it depends on a lot of different factors. Some factors may include the following:
• total salary before retirement
• total number of years in service
• total amount of contribution
• amount promised by the company before the retirement
• how much has the money grown
For most government offices, bullet number one and three matter the most. More often, government employees can receive higher retirement pensions if they reached the maximum years of service required from them. Typically, a person who retired upon reaching 60 would get higher compensation compared to a person who retired while they are in their 40’s or 50’s. Government offices may offer 100% percent of their salary upon retirement while some can get as much as 50 – 90% of their basic pay.
Private offices and employees who invested in private pension usually depend on bullets three to five. As mentioned, private employers have a choice if they want to contribute for their employees’ retirement fund. Some offices opt to pay for their employees pension in full while some only pays a certain percentage. Nevertheless there is no reason for us to be worried if pension contribution is not a part of our benefits, we can always take care of our pensions on our own.
If we wish it, we can make our contributions to a pension company. The pension company would then look for wise investments to make the money grow. Any earnings incurred by the contributions are passed on to the private pensioners. Of course, decisions like these should not be finalized until a risk assessment is made. We are, after all entrusting them the money that we have work for.
There are a lot of existing pension companies in the United Kingdom. Given that fact, how are we to supposed to know which one is the best and which among the companies take care of our interest. Research is a key detail. First, the pension company should have a great track record and good reputation. Second, they should be able to explain to you all the details involving your money. Investment plans and existing investments should be discussed. They should also have a reasonable insurance in case of bankruptcy. Third, it is best if the pension company can show you their accomplishments over the years. This can actually be a good profile of their decision making in terms of selecting investments. If the pension company can give us at least those three factors, we can be assured that our money can temporarily stay in their hands for safekeeping.
It is quite understandable if some of you may have their eyebrows raised at this point. Some of us may be led to think that investing in a pension company and depositing money in the bank would follow the same principle. To help us choose further, here are the details that clearly defines the separation of a bank account from a pension.
1. Money invested in a bank grows relatively slower. Regular bank accounts have standard interest rates per annum. Therefore, the interest that we get is independent of the money that the bank yields from loans and investments.
2. Banks does not release money unless you withdraw an amount from them. Pensions on the other hand can be arranged to be received monthly at the pensioner’s convenience.
3. Lastly, personal bank accounts would rarely have additional tax benefits. For UK pensions, a person who contributes for their own pension are not required to pay for additional taxes. Sometimes, the government even would grant incentives to people who know how to save up for the future.
Tags: occupational pension | occupational pension | company pension | company pension | private pension | private pension | work pension | work pension | UK pensions | UK pensions