Pension FAQ – Top Questions Answered

We welcome and encourage all types of pension related questions from our clients to help them understand their options and make informed decisions. Some questions pop up more than others, we have answered these below.

 

What is a pension?

A pension is a tax-efficient savings product whereby you add money to it throughout your working life and access the funds in retirement. It is a way of saving for later life to provide you with a comfortable future. There are many different types of pension products, which is why choosing a pension requires individual assessments and careful consideration.

 

What is a SIPP?

A Self-Invested Personal Pension, otherwise known as a SIPP, is a type of pension plan that allows you to save for retirement by investing in a wide range of investment vehicles. As such, a SIPP can be tailored to your investment risk tolerance and adjusted depending on the timeframe left before retiring.

 

What is a final salary pension?

A Final Salary Pension, also called a Defined Benefits Pension, is a pension plan that pays out a guaranteed income for the rest of your life upon reaching a pre-determined retirement age.

 

How much should I put in my pension?

The frequent amount you should contribute to a personal pension plan should be determined by individual circumstances, including your disposable income and retirement goals. A pension calculator can help you decide, but it’s recommended that you seek personalised support from an experienced pension adviser who can take other considerations into account, such as inflation.

 

Can I access my pension savings early?

Some pension plans will allow you to take out some, or all, of your pension early if you suffer from poor health, are diagnosed with a terminal illness, or can no longer work due to ill health.

 

What happens to my pension when I die?

The remaining value of your personal pension can usually – but not always – be transferred to someone else when you pass away. You will be able to name a pension beneficiary when you take out a plan, and even update your chosen beneficiary at any point in the future. The beneficiary may be able to choose to access the pension value as a lump sum or through instalments, which is known as adjustable income. 

 

How does pension tax relief work?

Pension tax benefits are an incentive from the government to save for your retirement.

When you pay into a workplace or personal pension plan, the UK government offers you a tax benefit. For basic rate taxpayers (20%), the government will contribute 20% of your regular contribution. For example, a contribution of £200 will only cost £160. Higher-rate taxpayers can also benefit but must claim back payments rather than having them paid upfront.

 

Should I seek financial advice before choosing a pension?

Pensions can be complicated, which is why professional financial advisers offer pension advice services and pension brokering. To avoid choosing the wrong pension for your retirement ambitions, speak with one of our friendly pension advisers today!