First things first, what is a pension scheme? Furthermore, known as a provident fund, this is simply a long-term investment platform with a primary objective of providing individuals with a reliable and decent income upon retirement. Many people have defined retirement differently and from a general perspective, it can be seen as the longest holiday in any occupation. It is for that reason that most individuals find themselves in financial doldrums after retiring. To prepare for retirement with a smile, then you must be ready to join this vehicle right away.
A look at the pension schemes
There are many types of pension schemes (Pensionsopsparing is the term in Danish) for employees of different income levels to choose the most befitting. The first type of pension scheme is the Personal Pension Scheme. This is a segregated personal pension plan that is the best option for self-employed people, those in small and medium organizations. What this plan does is to give those involved the opportunity of saving for their retirements while at the same time enjoying the advantages offered by the income taxes. Different groups such as banks, insurance companies, building societies, finance companies and so forth offer this retirement plan.
Basic state pension – This pension scheme is provided by the government. However, it differs from other retirement plans in that it depends on the number of years that you have been contributing to the National Insurance. According to different countries, this pension plan may require individuals to have various qualifications. On the bare minimum, qualified individuals will have more than thirty years of qualification to get a complete state pension. Again, one year of qualifying will be needed to get a basic state pension. Here, careers and parents can also get National Insurance credit to establish their years of qualifications.
Group pension scheme – This is simply a pension scheme that is established by a particular employer with the primary objective of offering employees benefits upon retirement. This scheme can also be extended to the dependants of these individuals upon their death. The relevant retirement benefit authorities must register these schemes, in order to realize the income tax relief. This savings scheme is also known as the occupational or the company pension scheme and it provides benefits such as on money purchases, hybrid arrangements, cash balances, defined benefits and so forth. This scheme involves two major arrangements namely the money purchase and defined benefits. In the event where you are leaving your job, the common practice is that you stop building your pension savings in the company’s scheme. Conventionally, employers did not allow their employees to join their pension schemes. However, currently employers must enroll their employees into certain workplace pensions.
Stakeholder pension schemes – This type of pension scheme is more of a derivative of the personal pension. However, they differ majorly in that individuals have to meet certain standards such as :
The saving scheme must accept contribution plans as low as twenty Euros per month.
It allows up to 1.5 % on the yearly limits of the charges of management.
It allows the user individuals to start, stop or change their contributions whenever they feel like it.