The different types of pensions
There are a number of different varieties of pension you can receive. The main types of pension include:
- The State Pension, paid to all UK retirees who have the necessary National Insurance Contribution credits.
- Defined contribution pensions, where a portion of a worker's salary is put away and invested on their behalf, usually with a contribution from their employer, until they retire. The accumulated fund is then used to pay their pension in retirement.
- Defined benefit pensions, where employers (and employees where appropriate) pay into a staff pension fund which is then used to pay ex-employees a pension income when they retire, the amount being dependent on their final salary. For this reason these are sometimes called ‘final salary’ pensions
- Personal pensions, where money is put away into a pension pot, but the investments will be selected and administered by the pension pot holder.
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