Pension basics
A pension helps you save for life after work. Over time, you build up benefits that provide income when you retire.
For Defined Benefit (DB) pensions, your income is usually based on:
- Your salary (as defined in the plan rules)
- How long you’ve been a member of the Plan
When you reach retirement, you may be able to:
- Take your pension from the Plan
- Convert part of your pension into a tax free lump sum
The options available to you depend on the rules of the Plan.
Planning for retirement is a big decision, and impartial guidance can make it easier.
We encourage all members to use MoneyHelper (https://www.moneyhelper.org.uk), a free, government backed service offering:
- Easy to understand explanations of how pensions work
- The latest information on retirement ages and pension options
- Tools to help you plan your retirement income
- Pension Wise appointments for members aged 50 and over
Understanding tax allowances helps you make informed decisions about your pension savings.
For more information, visit:
- MoneyHelper – Pension Annual Allowance (impartial guide)
https://www.moneyhelper.org.uk/en-and-retirement/tax-and-pensions - GOV.UK – Tax on your private pension contributions
https://www.gov.uk/tax-on-your-private-pension
For up to date information about the State Pension, including eligibility, how it is calculated, and how to check your forecast, visit:
- GOV.UK – State Pension overview
https://www.gov.uk/state-pension - MoneyHelper – State Pension basics
https://www.moneyhelper.org.uk/en-and-retirement/state-pension
Pension schemes, whether they are work based or personal pensions, usually allow members to take part of their benefits as a tax free lump sum when they retire. The scheme can pay a tax free cash sum on retirement.
An annuity converts your Defined Contribution/Money Purchase pension fund into an income for the rest of your life.
Annuities are sold by life insurance companies and you can add different options and get different types depending on your needs and circumstances.
If you are part of a Defined Benefit (DB) Pension Scheme then the scheme pays pensions straight from the scheme, so you will not be required to buy an annuity if you join the scheme.
Neither the trustees of the Scheme/Plan nor the Scheme/Plan administrators are able to provide financial advice, but they strongly recommend that you contact an Independent Financial Adviser (IFA) to assist you in making your retirement decisions. If you do not have a financial adviser, unbiased.co.uk can put you in contact with a selection of advisers in your area. You can visit their website at www.unbiased.co.uk .