Pensions

Pensions

A pension is a fund into which a sum of money is added during an employee’s employment years and from which payments are drawn to support the person’s retirement from work in the form of periodic payments. A pension may be a “defined benefit plan”, where a fixed sum is paid regularly to a person, or a “defined contribution plan”, under which a fixed sum is invested that then becomes available at retirement age. Pensions should not be confused with severance pay; the former is usually paid in regular installments for life after retirement, while the latter is typically paid as a fixed amount after involuntary termination of employment prior to retirement.

The terms “retirement plan” and “superannuation” tend to refer to a pension granted upon retirement of the individual. Retirement plans may be set up by employers, insurance companies, the government, or other institutions such as employer associations or trade unions. Called retirement plans in the United States, they are commonly known as pension schemes in the United Kingdom and Ireland and superannuation plans (or super) in Australia and New Zealand. Retirement pensions are typically in the form of a guaranteed life annuity, thus insuring against the risk of longevity.

A pension created by an employer for the benefit of an employee is commonly referred to as an occupational or employer pension. Labor unions, the government, or other organizations may also fund pensions. Occupational pensions are a form of deferred compensation, usually advantageous to employee and employer for tax reasons. Many pensions also contain an additional insurance aspect, since they often will pay benefits to survivors or disabled beneficiaries. Other vehicles (certain lottery payouts, for example, or an annuity) may provide a similar stream of payments.
The common use of the term pension is to describe the payments a person receives upon retirement, usually under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a pensioner or retiree.

UK Pensions

In this section we explain the different types of UK pensions and some of the terminology surrounding them.

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UK Pension Transfers

Find out more about the rules around transferring a UK pension and the potential benefits or pitfalls if transferring.

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SIPP

A SIPP is a self-invested pension. Find out more about SIPPs here.

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QROPS

A QROPS is an overseas pension scheme that meets certain requirements set by HMRC. A QROPS must have a beneficial…

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QNUPS

A Qualifying Non-UK Pension Scheme is a form of overseas pension available to British citizens. If the QNUPS complies with specific HMRC regulations, it will be….

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Irish Pensions

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Retirement Plans

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US Pensions

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Australian Pensions

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