Each country has its own pension system to guarantee its citizens an economically stable future. What is a pension really? And how does it work in the UK? A pension, or retirement plan, is a financial scheme designed to guarantee citizens a fixed income thanks to which they can live and support themselves when they stop working. If you live in the UK, you will have many different plans at your disposal and you’ll be able to choose the one that suits your needs. The British Government allows you to choose between an employee plan, a self-employed people plan and a contribution-based pension. Depending on the plan you choose, you will also be able to defer or leave your pension scheme. For instance, nest pensions opt out is a very common option.

All the retirement plans available in the UK

As previously mentioned, UK residents have a wide range of choices when it comes to choosing a retirement plan. Although all schemes available are different, some rules apply to all of them. First of all, all retirement plans available have been designed to offer the holder many benefits from the point of view of taxes. In fact, the Government will always contribute to your pension pot through tax relief. You should also know that a date has been set for you to be able to access your money, before which you won’t be able to withdraw anything. The retirement age is set at 55 years old for the majority of plans. Lastly, the money you monthly deposit on your find will be invested. This rule has been designed to give your money the chance to grow over the years. However, this can also put it at risk, for the outcome of every investment is unpredictable and subject to continuous swings. 

The workplace or occupational pension 

One of the plans available for UK residents is the workplace pension, which can also be called occupational pension. It is a pension scheme designed to grant employees with an income to which they’ll be able to live on when they stop working. To this kind of fund, your employer will always contribute by depositing a small percentage of your salary. Like explained above, the funds will be then invested. This type of workplace pension is called defined contribution pension scheme. You can also opt for a different type called defined benefit pension scheme, which will grant you a pre-arranged amount as soon as you turn 55 years old.

The personal pension 

The personal pension is meant to provide self-employed people and freelancers with an income after their working years. In fact, by choosing this plan the holder can set up his o her pension by deciding how much and how often depositing the funds. Then, as it happens for the workplace pension, the money will be invested by the pension provider. Also, for this kind of pension scheme, the Government will give its support by applying tax relief.

The state pension

Lastly, you can opt for the State pension, which is a regular payment by the Government entirely based on your previous National Insurance contributions. If you turn out to be qualified to get the State pension, you will be provided with a pre-arranged sum as soon as you reach the retirement age, which for the State pension has been set at 66 years old. Not everyone is entitled to get it, as a matter of fact you have to meet some requirements: only women born on or before April 5, 1953, and men born on or before April 5, 1951, will be able to get it. People who don’t meet these requirements will still be able to get a different kind of pension, which is called new State pension.