Defined contribution means the more you pay in, the more you get out – this is the case for most workplace pensions, too. The alternative is a defined benefit workplace pension. This type of pension is based on your length of service at a workplace and your salary and age when you leave.
Lastly is the State Pension, which almost everyone receives and is based on several factors. It is designed to help people over the state retirement age who paid National Insurance, or were exempt, during their working life.
Many people find that their workplace and state pension will not be enough to retire on and as an alternative, invest in personal pensions. You can choose to pay into your pension as monthly payments, or as one-off lump sums.
Most people’s employers will enrol them into a workplace pension scheme, automatically. When they do this they must give you the following information in writing:
• The auto-enrolment date to the pension scheme
• The type of pension scheme it is
• The company or organisation providing the pension
• How much they are contributing, and how much you will
• How to leave the scheme if you want or need to
• How the associated tax reliefs apply to you
Usually, workplace pension contributions are paid monthly, along with your paycheck or wages. In cases where workers are paid weekly, the pension contributions might also be paid weekly.
Personal Pensions Alongside a Workplace Pension
A workplace and private pension, as well as the state pension, will improve your finances in retirement. You can open a personal pension, but increasing your workplace pension payments instead offers some better value to some.
If you speak to a financial advisor about this, who did not explain that your workplace pension might be better than a private plan, having a workplace pension provides different benefits, the biggest is that your employer and the government will pay into it too.
As of the tax year 2019 to 2020, employees must pay 5% to workplace pensions and employers will pay an additional 3%. The government’s contribution comes as tax relief, which means that for every £100 put into the pension pot, they add an extra £25. This is because the money you put into a pension scheme should be tax-free.
Private Pensions for the Self-Employed
Self-employed people are entitled to the State Pension as anyone else is. The state pension is given if you have had ten years of National Insurance contributions or you were exempt for these years. This would include voluntary national insurance contributions if you paid them at any point.
If you are self-employed, you won’t have the benefit of a workplace pension provided by an employer, and you will only have the state pension. Unless you have lots of savings or little living costs, this is unlikely to be enough, so private pension funds for self-employed people are often needed.
Despite this, almost half of self-employed people have no private pension. This amounts to around 2.5 Million people in the UK without a retirement income in place.
A private pension for self-employed people takes the place of a workplace pension. Having a personal pension employer-run one can benefit people who enjoy having this control and the flexibility of choice.
Private and Personal Pension Mis-Selling
It’s unfortunate that so many pensions are mis-sold to savers who want to secure their futures with personal pension plans. Mis-sold pensions can cause personal stress and financial problems for many people.
Many people place trust in a financial advisor to help them choose a pension plan that is suitable to their needs. However, advisors have been known to go against what’s best for customers and instead line their own pockets and mis-sell pensions.
Pensions can be mis-sold for any number of reasons. Every pension mis-selling case is unique, and the general rule is that the advisor should always be honest and fair. Here are some guidelines to common reasons for a personal pension being mis-sold:
• You have health or medical problems that the adviser didn’t take into account, or didn’t even ask about.
• You were given limited information about the pension before you agreed to sign up, or there were hidden fees.
• , or they didn’t tell you a workplace pension might be better for you.
• You were not told that you would be allowed to shop around to find better deals, or were not given a chance to.
If any of these above bullet points sound familiar to you, you might be owed mis-sold pension compensation. Contact us today to find out if you might be owed thousands if you were the victim of pension mis-selling.
For a pension to be mis-sold it doesn’t have to be deliberate. A personal pension might be mis-sold due to negligence from the pension salesperson. If they didn’t take due care or consideration when they were looking after your finances, you might be owed compensation too.
It is important that financial advisors and salespeople must take care when talking to savers. If they deliberately or negligently sold you a bad pension plan or annuity, that is their fault.
How to claim compensation for a mis-sold pension
If you think there is a chance you might have been mis-sold a pension, it is important to act today. The longer you wait with any claims process, the harder it can be to prove that you were mis-sold.
There is no set time limit set on all pensions claims. But, there is a ‘three-year rule.’ The rule says once you notice that the pension might have been mis-sold, you will have three years to make a claim. It’s not impossible to do it later, but after three years it can be harder to win the compensation you’re owed.
Many people don’t realise that they could be owed thousands in mis-sold pension compensation claims. To find out what you might be owed, contact our specialist team today.