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Pension - Essay Example

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Pensions are not for elderly but a tax-free way to save for retirement. There are three types of pensions namely that the state pension, private pension and personal pension. State…
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Download file to see previous pages e payments to the NIC; however, one can be credited with the NIC if they are getting some formal benefits such as unemployment, sickness and parental benefits (BLAKE, 2003, p.68).
The current pension scheme is designed to have a flat-rate first-tier pension plan provided by the state. This pension scheme is referred to as Basic State Pension (BSP).Secondly we have the second tier or supplementary pension schemes which is provided by the state, private financial institutions, banks, insurance firms and employers. The BSP offers a pension scheme that is low compared to averages earnings, but the plan is fully indexed to prices upon retirement of the individual. The second tier pension plan offers relatively high pension that is partially indexed to prices up to a maximum of 5% per year after retirement. One of the disadvantages of the occupational pension schemes is that it is subject to change after change in employer. Lastly, we have the personal pension plans that offer partially indexed pensions but based on unpredictable investment returns and high administrative cost involved (BUCKLE and THOMPSON, 2004, p.126)
To get the basic pension one is required to have 30 qualifying years (NIC payments) and at least eleven qualifying years to generate 25% of the max amount. The pension received is taxed by the government but the payments are gross meaning that one is taxed when they start getting their pension. It is apparent that a student who plans to start a pension for future use should know that there different types of pension one can pay and save the money. These types include state pension where an individual receives the money after retirement in regards to the number of years one has contributed or paid to National Insurance Contributions (NICs) (BUCKLE and THOMPSON, 2004, p.130).
The individual should know that the eligible number of qualifying years one has to attain is eleven years, which generates twenty- five percent of the saving. For one to receive the ...Download file to see next pagesRead More
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