| The pension that you will eventually
receive will depend on the type of arrangements into
which savings have been made.
From a final salary scheme or defined benefit scheme
the amount of income you can expect each year is worked
out using a set formula.
The company might pay you, say, 1/60th of your final
pay for every year you have worked there. For example,
if you have worked for 25 years and your final salary
is £25,000, you will receive 25/60ths of £25,000,
which is £10,417 a year. It should be possible
to exchange part of the pension for a tax free lump
sum, now known as the Pension Commencement Lump Sum.
From a money purchase scheme, whether this is from
your employer or through saving into a stakeholder or
personal pension, the amount will depend on how much
your fund has grown and how much pension this can buy
you at that time. Again it is now possible to take up
to 25% of the final value as a lump sum.
The return on your investment depends mainly on the
performance and the type of fund(s) you have chosen
to invest in. As with any long-term investment, the
value of funds can go down as well as up and past performance
is no indication of future performance.
At Harris and Associates Financial Consultants Limited
we can help to provide you with an idea of what you
may receive at retirement and what you should be saving
in order to meet your expectations.
|
