private pension

About Private Pensions: Getting Help You Need



Posted on: 7th September 2023

Retirement planning Cheshire is one of those things in life that begins to dawn on us more seriously when we hit our mid-40s. The party and social calendars become more sporadic, whilst a focus on setting down into family life becomes stronger. One thing that starts to flash a lightbulb is being sure that you have enough money put aside with a plan for your retirement. Your twilight years are approaching much faster than when you were in your 30s, and pension advice Manchester seems more pressing in mid-life with later life waiting around the corner. One option would be starting a private pension – but why would you need one?

Is State Pension Enough?

Depending on your National Insurance contributions as a taxpayer over your working life, you will be eligible for a state pension paid by the government when you reach the state pension age. As you have seen on the news over the last few years, increasing life expectancy has seen the state pension age under constant review.

The maximum new state pension allowance is £179.60 per week, which for many is not a lot to live with – especially if you have missed NI contributions in the past. That is where private pensions come into play.

What Types of Private Pensions Are There?

With private pensions, you have two main types: defined benefit pension and defined contribution pension.

Defined Benefit Pension

A defined benefit pension tends to be arranged by your employer and is known widely as a workplace pension scheme. A small amount of monthly income goes into your scheme straight from your pay. The amount received from a workplace pension scheme depends on the rules of the scheme and your salary, and how long you have been employed by the company.

Workplace pensions traditionally provide a certain amount of money each year, with 25% eligible as tax-free to you. The age at which you can access your workplace pension depends upon the rules of the scheme you entered. It is traditionally around 55, but you can check this with your workplace pension provider. Auto-enrolment is common for workplace pensions – unless you opted out to put the income into a personal pension instead.

Defined Contribution Pension

A Defined Contribution Pension is typically a personal pension or stakeholder pension, set up by you with contributions invested into things like the stock market, property or bonds so that your pension pot value can fluctuate. The fluctuation comes down to the risk you take, with providers often moving money into lower-risk investments the closer you get to retirement. Before committing to this, talk with independent financial advisers Cheshire to understand the full extent of risks and benefits.

Speak with the team at Haven IFA to get unbiased pension advice Manchester that covers all private pension plans and suitability for your circumstances. As independent financial advisers Manchester, we can help set up your pensions and help you decide what to do with your pension pot as you retire.