Although you can save any amount of money into your pension, there is a limit to the amount of pension savings on which you won’t be taxed. The annual allowance, currently set at £40,000, is the maximum amount of money you can save up within a year with tax-relief.
If an individual exceeds the Annual Allowance in one year, they won’t be eligible for tax relief on contributions that exceed the limit, and may have to repay the tax relief or pay income tax on benefits that exceed the limit.
A fixed sum of money that is paid out to you by a chosen insurance company as an annual income until you die. In general there are different types of annuity that you can buy:
Within these options, there are a number of variables that can affect your annuity and provide a level of personalisation. For example, you can get an impaired life or enhanced annuity that pays more if the owner has certain medical conditions that diminish life expectancy, a postcode annuity based on the average life expectancy of the area in which the owner lives, an investment-based annuity which is correlated with the investment market, or a Purchased Life Annuity (PLA) which is purchased with money not tied to your pension pot. You can even purchase a temporary annuity which provides payment for a fixed term, up to a maximum of 5 years, if you didn’t want to commit to a lifetime annuity.
Annuity rates are what determine the level of income you will receive from your annuity. Annuity rates can fluctuate but, once you buy your annuity, the rate you receive is fixed.
Being behind in paying money owed. In the property market, ‘in arrears’ usually refers to a tenant falling behind on rent payments.
An asset class is essentially a category of assets. Assets could be a variety of things such as equities, cash, shares, and securities. Property is an example of a tangible asset.
Employers now have the duty to enrol their workforce automatically into a workplace pension scheme—whilst they must deduct at least 1% of the earnings of their employees to contribute to their personal pension schemes, employers must also contribute a fixed rate themselves. Although this process is automatic for anyone over the age of 22 earning more than £10,000 per year, once enrolled employees can manually opt out of their workplace pension scheme should they choose.
The basic State Pension (maximum £113.10 per week) is a regular payment from the UK government, which you are entitled to if you have paid or been credited with National Insurance contributions, and are a man born after the 6th of April 1951 or a woman born after 6th of April 1953. The State Pension fluctuates due to both the average percentage growth of wages in the UK and the percentage growth in prices as measured by the Consumer Prices Index (CPI).
The recipient of pension benefits, nominated by the original pension-holder in the event of death.
An event that results in the payment of an authorised benefit from an individual’s pension scheme. The most popular BCEs in retirement are:
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