Pension help please!

Miss_Gimp

Hi,

So I'm completely new to pensions and I'm trying to figure out what all the different types are and what you can have, so sorry if this is a bit nooby but I'm really clueless!

1. What's the difference between an annuity pension and a savings pension?
2. Can I have a work pension and a private pension at the same time? (someone told me I can have both, but can only pay into one at a time?)
3. If I have both, will they all pay out weekly/monthly when I retire, or do I have to take one as a lump?
4. If I have a work pension and a private pension, do I still get a state pension?

Any help would be awesome, thanks!
Nat

atush

I haven't heard of annuity pensions, but if you have a Defined contribution pension or a personal pension you can buy an annuity at retirement if you wish to. This pays an income for life and there are different types.

Savings pension would be the above described DC and PPs. There are also defined benefit pensions that you can get at some workplaces (such as in the public service) and these pay a set of benefits/income per year depending on the number of years you work there and your salary.

2, Yes. And you can pay into both at the same time, but there are limits as to how much you can pay in (ie your income or 40K whichever is lower)

3, they pay monthly or annually normally. Each can have a 25% tax free lump sum.

4. Yes

And the best sort of pensions are those that your employer pays into along with you so if there is a work pension, join immediately w/o delay

FatherAbraham

Miss_Gimp wrote: »

So I'm completely new to pensions and I'm trying to figure out what all the different types are and what you can have, so sorry if this is a bit nooby but I'm really clueless!

That's okay. We were all clueless about pensions once, and some of us still are.

Miss_Gimp wrote: »

1. What's the difference between an annuity pension and a savings pension?

I'm not familiar with that specific terminology, but if one builds up a pension fund through one's working life, it can be used to buy an annuity, which is an income for life, and very safe, or used up gradually by "drawing down" (withdrawing) the funds, which may provide higher income levels, but carries more risk of consuming all one's resources before one dies.

Miss_Gimp wrote: »

2. Can I have a work pension and a private pension at the same time? (someone told me I can have both, but can only pay into one at a time?)

You may have both at the same time; you may pay into both at the same time. (Until 2006, "A-day", there was a silly restriction on UK pensions which meant that one could only contribute to one at a time, but fortunately this red tape was abolished).

Miss_Gimp wrote: »

3. If I have both, will they all pay out weekly/monthly when I retire, or do I have to take one as a lump?

Each can be used to provide an independent income stream, and each can also provide a lump sum.

Miss_Gimp wrote: »

4. If I have a work pension and a private pension, do I still get a state pension?

Yes. Entitlement to the UK state pension is based on having paid enough National Insurance contributions for enough years (this usually happens automatically when one works as an employee in the UK, unless one has a very low income). After April 2016, you can get a full state pension, worth about £8,000 per year, if you have paid at least 35 years' worth of contributions -- and you must have paid at least 10 years of contributions to get anything at all (in this case, it would be 10/35 of the full state pension).

People who look after children up to 12 years old or others in need can get credits for National Insurance, even though they don't work. Ask if you want more details on this.

Having other sources of income does not affect entitlement to the UK state pension -- it is based on having made the required number of National Insurance contributions, and on having reached one's state pension age, which will probably be somewhere between 65 and 70 for you -- it depends how old you are now.

Warmest regards,
FA

dunstonh

I'm trying to figure out what all the different types are and what you can have

There is about 16 different types.

1. What's the difference between an annuity pension and a savings pension?

There is no such thing as an annuity pension. An annuity is a product you can buy when you retire to provide a guaranteed income in retirement. However, it has nothing to do with getting you to retirement (its not a pension).

2. Can I have a work pension and a private pension at the same time? (someone told me I can have both, but can only pay into one at a time?)

you can have as many as you like. The limit is on how much you pay in. Not how many you have.

. If I have both, will they all pay out weekly/monthly when I retire, or do I have to take one as a lump?

Typically, you would merge them at retirement and not keep them separate unless there are terms/benefits that means keeping them apart is best.

4. If I have a work pension and a private pension, do I still get a state pension?

Any personal provision you make has no impact on the state pension.

agarnett

Miss_Gimp wrote: »

Hi,

So I'm completely new to pensions and I'm trying to figure out what all the different types are and what you can have, so sorry if this is a bit nooby but I'm really clueless!

I think we were all pension clueless once, and many on here would say I particular still am, but I say with some confidence that only the first two of your questions can be answered in general fashion, with the other two being anyone's guess by the time you reach state pension age because, as is now being proved in these threads, it was ever thus!

Meantime, take all I say with a pinch of salt until the experts pitch in (one or two already did and may take issue with my responses for your benefit and better understanding!)

1. What's the difference between an annuity pension and a savings pension?

Broadly if you are looking to take advantage of the tax relief benefits of government approved pension contracts, then the first thing to get your head around is that the tax relief is not exactly something for nothing. It is a deferred taxation arrangement. You agree to save some of your earnings into a retirement plan (with its government restrictions on when and how much you can take out, and in return the government agrees to defer taxing that part of your current earnings put into retirement savings until it is time to start taking it out. Currently as a further part of the incentive to save like this, you can take out 25% of whatever is in your pot tax free after age 55. The rest is taxed like income in the year you take it out.

Pensions now also (apparently) come with handy inheritance tax advantages that you can't generally get with other types of savings pots.

An annuity is a kind of gambling contract with a third party. It is an old idea. Broadly, you give someone a lump sum of money or you keep paying them a regular amount which builds into a lump sum of money, and at the agreed date they then agree to pay you a regular income until you die. There are variations on the theme (e.g. index-linked income, guaranteed minimum period even if you die, spouses benefit if you die etc.). Broadly if you die early, the bet is over unless there's one of these tweaks, and they've won. If you live long, they lose so long as they don't disappear without trace before you do! Of course you have to save somehow in order to get the lump sum in the first place.

A savings pension is perhaps more or less the same thing up until the date you wish to retire. But at that point, you skip the old idea of buying an annuity with it, and what you draw down from your pot is (currently) up to you.

There are many savings pension products on the market, but one to get your head around sooner rather than later is a Self Invested Pension Plan (SIPP). If you are the type who can handle such, this is for those who think they have acquired the skills necessary to be more hands on with what their savings should be invested in from day to day/year to year.

However, you possibly may be tempted to save for retirement using non-pension vehicles e.g ISAs or maybe even Mediterranean style by building a portfolio of properties. Each of these has its own rules and problems of course.

2. Can I have a work pension and a private pension at the same time? (someone told me I can have both, but can only pay into one at a time?)

I think the answer currently is that subject to rules and limits you can pay into an employers scheme and a private pension at the same time,but I'll leave the experts to comment further on that one.

3. If I have both, will they all pay out weekly/monthly when I retire, or do I have to take one as a lump?

With recent so-called pension freedom there are (excepting public sector pensions) currently straightforward ways to take out all the cash in one go but you will end up paying higher rate tax up to 45% on it of course so generally not a good idea! I think most people are tempted after age 55 to consider if they should take what they can tax free (usually max 25%). But some may not - it is up to the individual at the time, but most importantly it depends on the government rules at the time. E.g. in 2006, some of us found that suddenly we could take various higher amounts tax free from our personal pensions (something called A-Day). One of mine allows 42% tax free although I haven't a damned clue why or how that one in particular qualifies when my others are restricted to 25%! The last government suddenly opened the doors to cashing in very quickly (many think it was a pure election stunt), but there is talk of some types of scheme just as quickly becoming banned from being cashed in completely just as public sector schemes can't be cashed in by any means anymore.

4. If I have a work pension and a private pension, do I still get a state pension?

Very very good question! The recent changes mean that the government is effectively reneging on past government promises and undermining some private sector employer schemes to reduce its longer term state pension liability. Who knows what respective governments will have done in the intervening period by the time you reach state pension age at age 75 or whatever

The state may by then have already decreed Logan's Run style that you don't need a state pension because you will be sent to Carousel well before you need one

https://www.youtube.com/watch?v=41tYQ18oK40

Don't worry, basic state retirement funding will always stretch to supply the long flowing white silk hoodies to give you a fine send off to ... Er, ... :eek:

Good luck!

xylophone

Re state pension https://www.gov.uk/state-pension/overview