Pensions are something that we need to start thinking about as early as possible especially as state pensions are unlikely to provide an amount we would need to live comfortably. However, many of us choose not to start planning for our retirement for various reasons such as not wanting to think that far ahead, it all seems to be a bit too complicated, not thinking you can afford it and not knowing which pension companies are the best. We have put together some pensions advice to help you start planning for your retirement.

Final Salary Pension Scheme

Final salary pension schemes are sometimes referred to as occupational, employer pensions or defined pension schemes. They are becoming few and far between and a number of companies have either ceased their final salary pension schemes or have stopped taking on new members. The reasons blamed for this change is the drop in interest rates, increase in life expectancy and falling stock markets. It is predicted that in 10 years the final salary pension scheme will no longer be in existence in the private sector. This means that no new contributions will be made, though people who have been included in the scheme in the past will still be eligible to receive the benefits from before the scheme was stopped. In the public sector it is suspected that even these schemes will have had to move to a money purchase type pension, otherwise they could end up with having to provide more money to members than the funds have earned.

Defined Contribution Plans

Defined contribution plans are also know as 'money purchase schemes'. This is a contribution scheme where employees pay a contribution of about 5% of their salary, but responsibility for the plan still belongs to the employer.

Stakeholder Pensions

Are pensions which are offered by your employer but are provided by financial companies such as banks, building societies and insurance providers. Many people set up stakeholder pensions instead of their own personal pension.

Read more about stakeholder pension schemes.

Retirement Pension or Superannuation Plans

Are often set up by an employer as a way of providing income to employees after they have retired. They became quite popular in the US around 1940 as due to the conflict at the time, wage increases were not allowed. This provided a way for companies to give back to their employees in another form other than a pay rise.

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Updated on 29th February, 2012

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