Have you made the mandatory savings for a comfortable retirement? Do you need to take an early pension release?
The pessimistic among us keep repeating that an impoverished retirement lies ahead for us all unless we get saving now. But how many of us really understand what a pension is and what we are required to do to guarantee an easy retirement?
An annuity is to all intents and purposes simply a long-term savings plan and its sole purpose is to supply you with a healthy retirement income. Essentially, a little cash gets squirelled away every month through your working life - and by retirement, this should have grown into a nice retirement sum. That sum is then (most generally) used to purchase an annuity, which should pay you back a fixed, regular amount, perhaps monthly and thus support your way of life well into old age.
To help you to start saving, the Government provides tax breaks on contributions. For instance, in the UK, basic rate tax payers take home £80 for each £100 earned (not including national insurance). Nevertheless if that £80 is then placed in an annuity, the Government rebates the £20 tax paid, allowing the full £100 to be invested. Similarly, subject to maximum limits, higher rate taxpayers get £100 invested for laying out only £60 of their take home pay.
There are two basic types of annuity - a personal annuity, which is a pension started by an individual , or an occupational scheme annuity, arranged by an employer. The second then breaks down further to 'defined contribution ', where a defined amount goes into the scheme and the payout relies on the expansion of assets, and 'defined benefit ' (now extremely rare), where contributions vary but the amount the scheme pays out is concluded ahead.
More popular these days is the taking of an early lump sum payment after review by a qualified annuity adviser. If an individual is over 55, they could be entitled to take up to 25% of their pension pot early and pay absolutely no tax on it .
The pessimistic among us keep repeating that an impoverished retirement lies ahead for us all unless we get saving now. But how many of us really understand what a pension is and what we are required to do to guarantee an easy retirement?
An annuity is to all intents and purposes simply a long-term savings plan and its sole purpose is to supply you with a healthy retirement income. Essentially, a little cash gets squirelled away every month through your working life - and by retirement, this should have grown into a nice retirement sum. That sum is then (most generally) used to purchase an annuity, which should pay you back a fixed, regular amount, perhaps monthly and thus support your way of life well into old age.
To help you to start saving, the Government provides tax breaks on contributions. For instance, in the UK, basic rate tax payers take home £80 for each £100 earned (not including national insurance). Nevertheless if that £80 is then placed in an annuity, the Government rebates the £20 tax paid, allowing the full £100 to be invested. Similarly, subject to maximum limits, higher rate taxpayers get £100 invested for laying out only £60 of their take home pay.
There are two basic types of annuity - a personal annuity, which is a pension started by an individual , or an occupational scheme annuity, arranged by an employer. The second then breaks down further to 'defined contribution ', where a defined amount goes into the scheme and the payout relies on the expansion of assets, and 'defined benefit ' (now extremely rare), where contributions vary but the amount the scheme pays out is concluded ahead.
More popular these days is the taking of an early lump sum payment after review by a qualified annuity adviser. If an individual is over 55, they could be entitled to take up to 25% of their pension pot early and pay absolutely no tax on it .
About the Author:
Info courtesy of the Adviser-hub.co.uk. It is always recommended that qualified annuities advise is sort by way of a full pension review to absolutely appreciate the potential effects on taking an early pension lump sum if that is what is necessary.
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