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Pension Guides

What is a pension?

Pension Guides

What is a pension?

What does ‘pension’ mean?

A pension is a pot of money built up to be taken when you retire. When you reach retirement age, you can take your money in a number of different ways; such as regular payments, one-off cash payments, or combinations of the two, depending on the rules of your pension scheme.

What is a pension scheme?

A pension scheme or plan is the way a pension is set up. It could be run by the company that employs you, or it could be a private pension, or the State Pension. Alternatively, it could be a trust, where the pension’s rules are set out by the pension’s Trustees, or it could be through a life insurance company.

A good pension is one that works for you and what you want to do in retirement – you need to check whether yours allows for money to be taken out as a ‘drawdown’, or as a lump sum, or taken on the open market, because not all schemes offer the same options. If you don’t like the system of the scheme you’re in, you can often transfer the value of your pension to another scheme with options you prefer.

What is a pension pot?

A pension pot is how much money you’ve put away in a defined contribution pension. It can grow or shrink with the funds it’s invested in. You might also have to pay an annual premium on your investments. With defined benefits, the company manages one big pot for everyone. If the pot has more money going out than coming in, the pension is said to be in a deficit.


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