Pension choices

I was having lunch with my daughter recently and was quite surprised when she brought up the topic of pensions. When I was in my early thirties I knew nothing about pensions other than my employer was providing me a scheme, we were both contributing to it and when I was 60 I would be able to retire with a comfortable pension. I did not even realise how lucky I was being in the public services and having a final salary scheme. I cringe when I consider how uninformed I was, but then most people were, pensions were not the hot topic they are today.

Anyway back to our discussion, which I thought I, as newly retired, would be more likely to raise. I was pleased that she was very clued up on her pension pot, the scheme she was in and most of all how important it is nowadays to keep an eye on the future, by keeping an eagle eye on your pension scheme.

So what are the pension options for people today and are they much different from my day I wondered?

State Pension

The vast majority of the population qualify for this, based on the number on National Insurance Contributions they have paid over the years. There are also Additional State Pensions for all but the self-employed. This has not altered much other than changes to the age for qualification. Nowadays it is increasingly difficult to maintain a decent standard of living on this alone, hence the need for other types of pensions.


Work Pensions.

These are a good idea because your employer contributes and you get additional benefits.

Occupational Pensions

If you have one of these you will have life insurance cover should you die when working for your employer, cover if you need to retire early through ill-health and a pension for your spouse when you die.

Salary Related

Your pension is calculated by taking into account your salary and the length of time in the scheme. You do not decide on the investment of your money, the trustees of the scheme do.

Money Purchase Pensions

You build up a fund by investing your contributions and your employers’ contributions; you generally have a choice of investment opportunities. When you are ready to retire you receive a lump sum which you use to purchase an annuity which will pay you a fixed amount for the rest of your life.

The types of pensions in this bracket are Occupational Defined Contribution Pensions, Group Personal Pensions, Stakeholder Pensions and Individual Personal Pensions. Although they are all slightly different in their set up they all pay the tax free lump sum at the end.

Private Pensions

These are pensions that an individual can shop around for; indeed some people have a few of these to cover all bases. They include Stakeholder Pensions, and Personal Pensions where charges are incurred but they are flexible about contributions and the contributions tend to be fairly low. Also included here are Self Invested Personal Pensions whish incur higher charges and are really only suitable for those with large funds and who know about investing, so it is a small market.


Much of the personal and private pension funds information was news to me. It is so important to my daughter’s future that next time the topic comes up I will suggest that it would be worth her while to consult an expert on the subject just to make sure that she is not missing out in years to come as more initiatives and opportunities arise.


If you are confused about your annuities and pension options then speak to an advisor at rightannuity.co.uk for independent advice and help.