What is a Pension Scheme?

In simple terms, a pension scheme is just a type of savings plan to help you save money for later life. It also has favourable tax treatment compared to other forms of savings.

It makes sense to put some money away for when you’re older and that’s what pension schemes help you do. You save a little of your income regularly during your working life so you can have an income in later life, when you want to work less or retire.

Saving for retirement is one of the most important things you can do for yourself. It is important to start saving as soon as you have your first real job. This will make it easier to save consistently, and it will increase the amount you save. As your savings grow, they will begin to earn more money and eventually will earn more each year than you are contributing to them.

What Happens When I Retire?
Once the money is in a pension, it can’t be withdrawn willy-nilly. It must stay there until you’re at least 55. (There are some extenuating circumstances where you can withdraw the money before 55). At that point, you can take 25% of it as a tax-free lump sum, with the rest ideally providing an income for the rest of your life.