Putting a value on your pension savings in the future
The pension lifetime allowance is a limit on the value of payouts from your pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge. The lifetime allowance for most people is £1,030,000 in the tax year 2018/19.
The State Pension is a regular payment from the Government that is claimed when you reach your State Pension age. The State Pension is based on your National Insurance record. It takes into account the National Insurance you built up before the new State Pension was introduced in 2016, as well as contributions and credits since then. This means not everyone will receive the same amount.
Building up a pot of money to provide an income in retirement
With a defined contribution pension, you build up a pot of money that you can then use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.
Paying out a secure income for life which increases each year
A defined benefit pension scheme is one where the amount paid to you is set using a formula based on how many years you’ve worked for your employer and the salary you’ve earned, rather than the value of your investments. If you work or have worked for a large employer or in the public sector, you may have a defined benefit pension.
A personal pension is a type of defined contribution pension. You choose the provider and make arrangements for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.