Retirement Products

Annuity – An annuity is a contract between an insurance company and a pension scheme investor, where the investor uses some or all of their pension savings to purchase a regular and guaranteed income for the rest of their life, or for a predetermined number of years. The factors that determine the amount of income you can expect to receive include your age, state of health, postcode, prevailing annuity rates, type of annuity bought and the size of the pension pot. An annuity provides a regular and secure income for life, and can be tailored to meet specific individual needs and circumstances.

Enhanced Annuity – An enhanced annuity provides a higher income in retirement than a standard annuity does, due to health and lifestyle circumstances. Someone with health conditions is seen by an annuity company as someone that they will pay for a shorter period of time due to having a shorter life expectancy. Therefore a higher income during retirement is provided on the assumption that it won’t be needed for so many years.

Executive Pension Plan – An Executive Pension Plan (EPP) is an old type of company pension scheme. Older EPPs were often very expensive pension schemes, so you may be paying a lot for what you are getting. Since 2006, all pension schemes have a basic entitlement to tax free cash of 25% of the value of the fund. Under EPP rules the amount of tax free cash might be higher than 25%. This depends on your earnings, and the number of years you were in the pension for.

National Employment Savings Trust (NEST) – A defined contribution workplace pension scheme, set up by the UK government to facilitate auto enrolment. As a ‘qualifying’ scheme, NEST can be used by any UK employer to make pension contributions. Workers earning more each year than the government determined lower level, will be enrolled automatically in NEST if the employer doesn’t have their own pension scheme. Lower earners can join, but must choose to opt in.

Occupational Pension – The employer will make all the arrangements for the employee. Every payday, a percentage of the employee’s pay is deducted from their salary and invested into the scheme. The employer also contributes to the scheme on behalf of the employee, as does the government in the form of tax relief. There are two types of scheme – a ‘defined contribution scheme’ where the employee’s retirement income is based on the contributions made, investment returns and annuity rates, and a ‘defined benefit scheme’ where the employee’s pension income is based on the salary and length of service.

Pension Drawdown – This facility currently allows anyone over age 55 with a defined contribution pension to take income directly from their pension fund without needing to buy an annuity. As the bulk of your pension remains invested the fund is still able to benefit from any growth in the value of its investments. Although you can withdraw up to 25% of your pension fund tax-free, anything else you withdraw from your pension pot will be taxed at your highest marginal rate of income tax.

Personal Pension (PP) – Many investors will have these in some form. These schemes may have limited or wide fund ranges and high or low charges – it really depends on the individual plan. Likewise benefits and options may be limited on death or retirement. These schemes should be assessed to ensure they remain suitable.

Retirement Annuity Contract (RAC) - An old style of personal pension which is often invested in a with profits fund. These schemes may have integral benefits such as a guaranteed annuity rate or guaranteed minimum pension fund at retirement, however death benefits may not match the full fund value and the options on death or retirement may be limited. These schemes should be assessed to ensure they remain suitable.

Self Invested Personal Pension (SIPP) – SIPPs are designed for investors who want maximum control over their pension and a wide choice of investment funds. The charges may, but not always be, higher than for a personal pension or a stakeholder pension – an assessment of these will ensure you are not paying too much. A SIPP holder has a much wider choice of assets to invest in, each of which can be selected to meet the individual’s personal circumstances and requirements. You choose the pension provider and make the arrangements for paying the contributions – it is important to start contributing as early as possible and to keep making contributions for as long as possible in order to build up the pension pot.

Stakeholder Pension Schemes – A Stakeholder Pension is a type of Personal Pension designed to provide an optional lump sum and income in retirement. Stakeholder Pensions are available to any UK resident under the age of 75, even if you have a workplace pension, or if you’re self-employed and don’t have a workplace pension. Generally they provide the full value in the event of death, but due to their basic set up do not allow the full options available on death or retirement. These schemes should be assessed to ensure they remain suitable.

State Pension – The basic State Pension is paid by the Government when you reach State Pension age. This age is currently due to rise to 67 between 2026 and 2028, with further proposed changes expected to increase it to 68 in the future.  The amount you receive is based on the number of National Insurance contributions made during your working life. The State Pension is expected to increase annually.