A pension is effectively a savings account that you can access when you retire.

Most people are unaware of how much money they need to put aside to give a comfortable life after retirement. The government are struggling to cope with the strain that pension payments put on there budget, meaning its probably not advisable to rely on a future government pensions plan. The current basic state retirement pension is only £72.50 per week for a single person. So if you want financial security in later life then you'll need to start thinking about it now.

There are 3 main types of pension!

Company Pensions

With a good company pension the employer will pick up most or even all of the cost of providing the scheme and often even contribute towards your pension. The two main kinds of company pensions are Money Purchase and Final Salary and you can sometimes have the option of making an Additional Voluntary Contribution (AVC).

Personal Pension Plan (PPP)

This is an ideal pension if you are self-employed or if you change jobs on frequently basis. Good personal pension plans should allow you the option of retiring when you want to, probably sometime between the ages of 50 and 75 without any penalties. It should also allow you to be flexible when ending your working life by maybe working less hours, rather than stopping suddenly. And it’s also important that it should allow you to reduce or suspend your contributions if you want to.

Stakeholder Pensions

Stakeholder pensions were launched by the government primarily for people who don't have access to a company pension plan and can’t really afford or sustain a personal pension plan (PPP). There essentially just cheaper and simpler versions of PPP’s and the providers are only allowed to charge an annual management fee of up-to 1%. All employers that don't offer a company scheme must give employees access to a stakeholder pension scheme, but they don't have to contribute. One of the main benefits of a stakeholder pension is its flexibility, allowing you to transfer to another scheme without penalties. You can also stop, start and change the level of contributions at any time which can be very handy if you switch jobs regularly.