It is nature’s way: first we are born, then we grow and experience active and fulfilling lives during adulthood, and then our bodies start to age. We become less agile and unable to do things that we used to do when we were young; we can no longer get a job to support our daily needs.
During these years, the golden years, it is always best that we have a dependable source of funds from which we get money for sustenance. Through enrolling in a personal pension plan during the time when we are still employed and active, we are assured of a secure and pleasant old age.
It is an investment plan wherein an individual contributes a specific amount from his earnings in order to save for his retirement. If he is employed, his employer can also contribute to his personal pension plan. Both the employee and the employer will enjoy tax relief on their contributions.
Like most pension plans, personal pension also extends death benefits to plan holders which will be given to their heirs upon their death.
What Are The Types Of Personal Pension?
It has two types: the Insured Personal Pension (IPP) and the Self Invested Personal Pension (SIPP). In the IPP, the plan holder can select an investment fund from the list provided for in the contract.
In the SIPP, the plan holder enjoys more flexibility in choosing from among several HRMC approved investment funds. Unlike those who chose the IPP, SIPP plan holders exercise more freedom in the handling of their investments.
A personal pension plan matures when the plan holder reaches the age of 75. During this time, he is entitled to receive a lump sum comprising 25 % of his funds which is tax free. The rest of the funds will be given to him as a taxable pension.
He also has the choice of placing part of his personal pension plan in a Secured Pension plan, an Unsecured Pension (USP) plan, or in an Alternatively Secured Pension (ASP) plan. The ASP allows him to pass his funds to his heirs’ pension funds when he dies.
When you are employed and earning enough for your needs, it is good to start saving for old age. This way you will have a head start and be confident that your senior years will be well provided for.
Personal pension is a good way to save for your golden years because it gives you a safe and secure investment plan for your funds aside from offering tax relief on your contributions.