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Pension Funds Explained

24th March 2017

A pension fund is a type of investment that members who’ve signed up to the scheme pay in contributions, to build up a lump sum so that upon retirement they’ll receive an income. Pension funds are the biggest investors in the finance industry which goes to explain why decisions around what assets to buy and sell has a huge impact on the markets.

Pension funds are a means to providing you with an income upon retirement. It’s these funds that invest money in assets that give a return in the long-term future. This is due to each of the pension scheme members trusting that their fund will give them enough money on retiring to secure a satisfactory annuity.

An annuity is a financial product that guarantees the owner a fixed annual income for a certain period.

Essentially, there are two types of pension schemes to choose from:

1) Defined contribution pension schemes
With this option, you can build up a pot of money that provides you with an income in retirement. The income you may get from a defined contribution scheme is dependent on the amount you pay in (your pension contribution), the fund’s investment performance and the decisions you make once retired.

2) Defined benefit pension schemes
This pension scheme pays out a secure income for life that increases with each year.
If you’ve worked for a large company or in the public sector, you’ve possibly already got one. With this scheme, you can also contribute. A great benefit of this type of pension is that they normally continue to pay a spouse, civil partner or children after your death.

Having an appropriate pension scheme allows you to plan for your retirement, giving you peace of mind that your future financial needs will be met.

Whether you are after advice pertaining to your own pension or are a business client looking to set up a workplace pension scheme, our skilled advisors have the information and expertise that you need.

Contact us today to find out more.

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