Pensions
Pensions are a form of investment that provide people with a regular income once they reach retirement age and stop working. There are various types of pension that you could potentially get and some pensions can be given at the same time (i.e. a state and a company pension).
State Pensions
State pensions are paid by the government when you reach retirement age although you can defer payment until a later date if you wish. You are given a basic pension if you have amassed enough ‘qualifying’ years of paying National Insurance. To do this you may have paid National Insurance contributions through your job, as a self-employed individual or you may have been given credits for periods when you did not work such as when you were bringing up children. People who have made a specific level of National Insurance payments may also be entitled to an Additional State Pension.
Company Pensions
Many businesses will set up pension plans for their employees. These can work in various ways. Generally here your employer will make payments into your pension fund at the same time that you make payments into it to give you a higher pension. In some cases the pension you have here will not be transferable if you leave work with the employer but in others you may be able to take it with you - this option is most often given in Group Personal Pension schemes.
Personal Pensions
You take out personal pensions yourself from financial institutions. Many people use this as a means of saving or if they do not have access to a company pension scheme (i.e. if they are self-employed). These pensions will currently pay out when you reach the age of 50 but the limit here will be raised to 55 in the next few years.
Stakeholder Pensions
Stakeholder pensions were set up by the government to allow people to set up a personal pension scheme. They are designed to help people establish a pension who may not otherwise have met any pensions criteria (i.e. they may not get a company pension, may not work many hours or earn much or they may be self employed).