Due to the cost liability of guaranteeing the level of pensions to be paid, Final Salary schemes are becoming less popular with employers. More and more employers are opting for Defined Contribution schemes also called Money Purchased schemes.
Money Purchase usually refers to a Group personal pension. As with a Personal Pension, contribution are enhanced by the tax relief and members build up a personal pension pot, which they then convert into an income at retirement. For a Group Personal pension, the employer sponsors the scheme - the employer arranges the Pension provider, provides a central administration function (usually Human resources), and may also contribute to the employees’ pension pot in line with the scheme rules. Hence the pension is a Group Personal Pension.
The pension fund is invested in a range of investment funds usually chosen by the individual according to their attitude to investment risk. The aim is to grow the fund over the years before retirement
For retirement after April 2015, the new rules will apply and you will be able to access and use your pension fund in any way you wish from age 55. You will be able to:
- Take up to 25% as a tax free lump sum
- Buy or not buy an Annuity to generate a regular income, with some or all of pension fund and/or
- Leave your fund intact and withdraw the remaining cash in stages or as one lump sum, but this will be taxed as any other income you receive.
If you are evaluating your pension, we strongly advise that you seek professional advice from a fully qualified and regulated Independent Financial Advisor. Pension decisions are usually a major financial decision that requires the appropriate level of advice to make the right choice. In contrast, mistakes can be costly. To arrange for a no obligations, initial free telephone consultation click here.