Prime Time Financial

Pension savings are about preparing for an income in retirement. You can find out more about taking an income when you are retired in our Retirement Income section.

There are two types of pension scheme: "Money Purchase" (or "Defined Contribution"), and "Final Salary" (or "Defined Benefit"). The number of final salary schemes is steadily reducing due to costs, but in general, if such a scheme is available from an employer, full advantage should be taken. We shall be considering the first type here - Money Purchase schemes.

The best income in retirement comes if you (or an employer) start saving into a pension plan early on in your working life. Unfortunately, other priorities like a mortgage and family often get in the way of this! But from 2012 the Government is planning to encourage everyone in employment to contribute to a pension plan with the employer contributing as well.

At whatever stage of life you start a pension plan there are tax advantages in making contributions to the plan. These are in the form of tax relief which, in effect, increase the value of your plan over and above the value of an equivalent non-pension investment.

Having said that, a pension plan is basically an investment, and subject to many of the same criteria and considerations, such as your attitude to risk, and your preferences on the type of investment to make. As such, you should always remember that investments can go down in value as well as up, and that you may not get back the full amount invested.

Types of pension plan include "Stakeholder" pension plans, "Personal Pension Plans", and "Self-Invested Pension Plans". There are also some older types of plan which are still active such as "Retirement Annuity Contracts", "Small Self-Administered Schemes (SSAS's)" and "Section 32 Policies". And since retiring is more of a process than an event these days, some types of plan will move seamlessly into retirement, switching to provide an income - perhaps on an increasing basis - when you need it.

Last reviewed 26th April 2011