MANY people have a pension plan in place, but may not know what type of pension they have or how they will get the money when they come to retire.

There are two main types of pension - Final Salary (or Defined Benefit) and Money Purchase (Defined Contribution).

The first type is usually set up by an employer and pays out a specified pension payment dependent upon the time that you have worked for the employer and the salary that you have earned.

The second type, Money Purchase (Defined Contribution), can be a workplace pension or a personal pension.

Money is paid in by you and/or your employer and the value of the pension pot is determined by the performance of the funds it is invested in.

What are the main ways to access a Defined Contribution (Money Purchase) pension?

You can take up to 25 per cent of your pension as a lump sum, and this will normally be tax-free (some older pensions may offer you more).

The remainder can be taken as taxable income.

What is an annuity?

This is a guaranteed income for life. The final value of your pension pot is used to buy an ‘annuity’ which is a regular income paid for the rest of your life.

This gives you an amount each month to live on. Annuity rates dropped to an all time low in September 2016 after the Brexit referendum and despite recovering since, they are still low as they are linked to gilts and interest rates which are also low.

What is flexi-access drawdown?

This is where you can take money out of your pension as and when you need it. You can take this either as lump sums or a regular income.

Not all pension providers offer flexi-access drawdown and large withdrawals could push you into a higher tax band. At Beaumont we would be able to help you manage this according to your own situation and financial needs.

At Beaumont Financial Planners Ltd we help clients to plan for retirement and ensure that they have an investment strategy in place to aid in the growth of their monies. The investments are matched to your attitude to risk, needs, objectives and personal circumstances to ensure that they are suitable for you.

For a free consultation please get in touch with Beaumont Financial on 01691 670524.