Now it is unlikely that the state pension is enough to live comfortably in retirement. It offers only basic support, and the government wants to encourage people to save as much as they can supplement their state pension , and give yourself comfortable retirement income. As well as better health in the general population - which means the life expectancy longer - and decrease equity market returns over the past decade, the so-called pension crisis "is a call to action for people to plan finances carefully and put more money aside to ensure a secure future for themselves.
Next we present some guidelines related to the pension:
Save for the future
There are many ways to save for the future - savings accounts, stocks and property and investment, for example. However, these items are taxable. Pension plans are much more effective than tax tax relief is given on contributions and income they provide during retirement is tax free. This is why pensions are a common form of retirement savings.
There are two main types of pensions for staff - the final salary and the purchase price. The first may be provided by occupational schemes, but the second can be purchased privately on an individual basis.
Final salary
The final salary schemes, also known as defined benefit schemes to provide guaranteed income is calculated as a percentage of salary earned during the last years of work and service to society. And 'possible to stay up to two-thirds pay.
As it ensures the provision of a certain level of income, often considered the best type of retirement plan available. However, there was a decrease in the number of employers offering final salary schemes in recent years due to the cost of maintenance. The declines in the stock market have been many mutual funds for retirement drastic fall in the value, which means the employer must pay the difference to provide guaranteed income for plan members. Another expense for employers with final salary schemes is 10% tax on dividends, a measure introduced by the government in 1997, which in turn can have a negative impact on the size of pension funds.
The purchase price
With systems purchase money, also known as the plans "defined contribution" payments for credit union members and invested in the stock market. Retirement, the accumulated funds used to purchase what is called an annuity which provides for a regular retirement income. The amount you receive at retirement is not guaranteed - it depends on how the stock market has achieved and annuity rates when you leave your pension. While the final salary pension bear the burden of risk on the employer to offset amounts to a guaranteed level, the member is responsible for the risk of a decline in defined contribution plans. Members may therefore need to save more money independently to ensure they have a comfortable retirement.
You have the flexibility to choose which funds invest your money, and their decisions will depend on your attitude to risk. High-risk investments can offer much higher performance potential, but at the same time, it may be the greatest losses. "Safer" investments reduces the risk of loss, but will not be able to produce high yields in high-risk investments.
Annuities
An annuity is a fixed, regular money paid to someone, usually for the rest of his life, which was purchased as a lump sum from the pension fund, for example. He invested in the stock market, funds are generally considered safe. Annuity rates have fallen over the last decade, which means that many people are now expecting lower annuity income and are forced to change retirement plans. However, there are several options when it comes to annuities. Members are not obliged to take the annuity offered by the system - can use the accumulated pension funds to buy an annuity from any annuity provider on the open market, where they can get a better interest rate. It 'also possible to take up to 25% of the pension fund tax-free lump sum in cash, leaving the remaining 75% buy the annuity.
The third option is to take short-term annuity is a maximum of five years to maintain a pension invested for a little 'more in the hope that it will increase in value, so that you can buy an annuity continues to align itself better life. Another way to delay taking the pension is to get revenue directly from the pension fund, keeping it in the hope of a greater return on investment to maintain revenues. However, the value of the assets would go down as easily as they could get, which can leave worse. This option is known as' withdrawal not guaranteed retirement income. "Finally, you can not buy an annuity at all, but an income directly from the pension fund from the age of 75 with the" alternative retirement insurance ". Before 2006, it has a legal obligation to buy an annuity pension at the age of 75 years, but the law changed to allow more than 75 to achieve this, instead of income, even if the total amount of revenue can be pulled down, is 70% of the annuity for life. It is intended for people who are opposed to the purchase of annuities for ethical reasons because of religious beliefs.
Stakeholder schemes
Stakeholders pensions, the government established in 2001, which aims to facilitate personal pensions for people who do not engage employers occupational pension schemes. How the money to buy the plans, stakeholder pensions invest in the stock market, bonds, savings and cash accounts and money, which is used to buy an annuity at retirement. They are designed to be easy to understand, flexible and cheaper than other pension plans. The maximum price that system administrators may charge an annual management of the funds is 1% of the value of the fund, and fines may apply if the members want to transfer money in or out or to stop taxpayers. However, there is a limited amount that can be placed, so they are designed for people with low income and middle-income than high income.