Customize Your Pension

Pension is an arrangement to provide funds to the people when they are no longer earning their regular income. Pension should never be confused with severance pay as pension is paid in installments just like salary but severance pay is a lump sum amount. It is necessary to decide in advance about your pension need and what available options you have. Consider the following points when choosing options:

Compare personal pension charges with stakeholder pension charges. Stakeholder pension policy charges depend on the following:

1. The limit set by law should never exceed the amount charged by the management.

2. For members who bought their stakeholder pension scheme before April 6, 2005 have a yearly charge limit of 1% for the duration the policy is held. Members who have migrated to another stakeholder pension policy on or after April 6, 2005, a yearly charge of 1.5% is applicable to first 10 years.

3. Pension scheme providers can also recover other charges and cost applicable with yearly management charges.

4. It is optional to provide extra services with stakeholder pension schemes not provided by the law.

5. Do not quit before the stakeholder pension scheme expires. A few stakeholder pension providers set up the fund's returns smoothly over the years and quitting early can result in the reduction of individual's funds held in the scheme.

6. In some organizations, you will find that employers do contribute to your pension scheme whether it is a personal pension or stakeholder pension, along with occupational schemes. It is better to ask your employer if they would contribute to your pension scheme before you think of taking a personal or stakeholder pension scheme or an occupational scheme.

7. There are different pension schemes available. Some provide higher returns while others provide better security. Keep in mind, schemes that provide high returns also have high risks associated with it and require more investment in comparison to other pension schemes. Consider all the available options before making a decision.

8. Often you may find another scheme paying higher returns in comparison to your existing pension scheme. Ask the pension provider what extra charges you need to pay to migrate from your existing pension plan to a new scheme.

Payment for most of the personal pension schemes can be paid in regular monthly installments, quarterly installments or over a fixed period of time. While some personal pension providers allow you to control the amount of payments you pay them, others might let you change the amount of payments without charging extra. So people who often change the amount of payments must be careful as you may have to pay an extra charge to your pension provider. Such charges are termed as hidden charges and your personal pension provider may conceal the fact.

While you can pay a fixed amount over a period of time, you also have the option to pay in lump sum. This can be done in a single payment or a series of payments that result in lower charges in comparison to installments. A single amount is rarely paid by the people so only a few providers may provide such an option. Also, you get tax relief on your pension payments but up to a limit set by the law. People not working may also opt for stakeholder or personal pension schemes.

The information provided above is quite resourceful but should not be considered as complete or similar to obtaining an advice from a financial advisor. So, you must apply your best efforts and evaluate every possible option before deciding as your future lie in your own hands.