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Pensions Explained

To afford the lifestyle you want when you retire, you need to do something about it today - the buts stop here. It may be tempting to say, "But retirement is a long way off", yet it's never too early to start investing in order to protect your future. To find out more, read our 'Pensions Guide' section by clicking 'Open Guide'. Once you have read that, why not view our 'What is a Pension?' video, presented by Lisa, our online guide.

Pensions guide

Our easy overview introduces you to the basics of pensions, provides information on the products available and gives you helpful hints on things to consider.

Firstly, it's important to know that when we talk about pensions, we mean your pension plan. This is the way in which you invest for retirement rather than the income you get. Basically, a pension is a long term investment that helps you save for your retirement. Payments into your pension are collected together and invested to build up a pot of money known as your pension fund. When the time comes to retire, it is the money built up in the plan that will be used to provide you with a regular income.

As the government is keen to encourage us all to put money away for our retirement, they've made pension plans tax efficient and you can benefit from basic rate tax relief on your payments. This means that currently, for every £80 you pay in, the government will add a further £20 to your pension fund. And, if you pay income tax at more than the basic rate, you may be able to reclaim further tax relief when you complete your tax return (which does not get added to your pension fund).

Many employers will also make a payment into your pension fund. They'll contribute money to your pension on top of paying your salary. If you work for a company or small business, you should talk to your manager or Human Resources department to find out what you may be entitled to. It may not be immediately obvious, so it's always worth asking the question.

With the government and possibly your employer adding to your pension fund every time you pay money in, you're effectively getting extra money added for free.

The government has introduced auto-enrolment as a way of helping people build up a pension. It's happening in stages and the date your employer needs to enrol staff in a scheme depends on the number of employees on the payroll.

If you are eligible, your employer will automatically enrol you in a qualifying workplace pension scheme (one with high enough contribution levels). Your employer will tell you more about this closer to the time they're ready to enrol you in the pension scheme. For more information visit - www.gov.uk/workplacepensions

When you retire the money built up in your pension fund is used to buy an annuity or another product which provides you with an income in your retirement. Your pension income will be taxed as earned income.

The money in your pension plan is invested with the aim of growth and the final sum is used to buy an income when you retire. However, you need to be aware that the value of your pension fund can go down as well as up and may be worth less than the amount paid in. You should also be aware that tax rules may change in the future.

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Pension Tracker via MyAviva

Pension Tracker is an exciting way for you to take control of your Aviva pension plan. It's an online service that helps you manage your pension arrangements any time that suits you, much as you can with internet banking.

Let us help you sort out your finances

Again if your response is, "But I don't really understand how to plan my finances better", we're here to help. It's all about getting the information you need to make the right decisions. Our tools and calculators can help you get to grips with your finances and plan for the future.

Pension calculator
See whether you're on track to fund the retirement you want.

What Next?

Now you've learnt more about pensions, you can compare the features of Aviva's pension plans, or apply for your chosen option:

Stakeholder Pension

You can start a Stakeholder Pension plan with as little as £20.

It's a tax-efficient way of investing for your retirement, but bear in mind that you won't have access to the money in your pension fund until you retire.

Find out more about stakeholder pensions

Personal Pension

You can make regular or one-off payments into a Personal Pension plan and stop, restart and change your payments to suit yourself.

It's a tax-efficient way of investing for your retirement, but bear in mind that you won't have access to the money in your pension fund until you retire.

How to apply for a Personal pension

WC03077 07/2014