Overview of the UK pension system

Document Type:Essay

Subject Area:Finance

Document 1

Majority of the employers and particularly for the large organizations already give the company pension schemes and this is a requirement by the law. According to the current legislation, employers ought to have pension schemes installed and the workers shall be enrolled automatically if they have attained the age of 22 years, start earning above 9,440 euros and they are already not signed up in another plan (Whiteside 294). For the workers, company pension scheme is indeed among the simplest and sure ways in which one can put some of their earnings for the sake of retirement. The employer with the help of the pension scheme that they are subscribed to, will assist the employees to establish their company pension scheme easily and quickly as the employee begins to work for their company.

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One advantage accrued from company pension scheme is that the company often matches the employee’s contributions. One can take a tax free of up to 25% if they attain the age of 55, and thereafter choose between purchasing annuity for particular income after retire and choosing for a drawdown, where the amount of money remains as an investment in stock market and be earning variable incomes from such investments on the basis of their performance. There are several varieties of personal pension, and each of them has subtle differences. Example of these is the stakeholder pensions, and these are basically forms of personal pensions where a certain set criteria has to be met. An example of such criteria is that annual costs of administration cannot go beyond 1.

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5% and they have to accept contributions even as little as 20 euros (Blake 5). One option of taking your pension involves leaving some amount in the investment and taking some of it as income, and this is what is referred to as income drawdown. The regulation demands that the total amount that one has for their retirement is dependent on the amount that was paid into the pot, and the performance of the investment. Thus the pension provider should clearly make known to the pension savers of the type of pension that the savers have. The pension saver has a choice to make concerning how they should get incomes from their pensions. So one of those options would be to leave some pension funds invested and have some of it as their income.

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These regulations are effective and many people ensure that they comply with set regulations to avoid attracting a lot of charges and tarnishing of reputation. Impact losses on equity markets such as the FTSE 100 for the period from April 2015 to January 2018 had on income drawdown plans The pension freedom changes in 20115 April caused some surge in popularity of the income drawdown schemes that allows one to withdraw sums from their pot as the rest remains in the investment, but recent carnage in the financial field has really left many investors standing on very huge losses. The fall of FTSE 100 stock was really bad for the income drawdown plans. It resulted in weakening of the economy of UK. The losses were devastating, with 100,000 euros pot potentially reducing to 88,500 euros (Kay 112).

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