Which?
How to access your pension
Dec 5, 2024
Jenny Ross, the Which? Money editor, and Tom Selby, Director of Public Policy at AJ Bell, explore the critical decision of accessing your pension. They break down the intricacies of annuities versus pension drawdown, discussing the benefits and risks of each method. With insights into the evolution of pensions since 2015, they emphasize the importance of comparing rates and providers. Listeners gain valuable advice on navigating pension options, understanding associated costs, and making informed retirement planning decisions.
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Quick takeaways
- Understanding the differences between defined contribution and defined benefit pensions is essential for effective retirement planning and income sustainability.
- Choosing between annuities and pension drawdown involves evaluating the trade-offs between guaranteed income and the flexibility of accessing funds.
Deep dives
Understanding Pension Types
Pensions can be broadly categorized into two main types: defined contribution pensions and defined benefit pensions. Defined contribution pensions, which are the most common today, involve contributions from both employees and employers, where the ultimate retirement income depends on the amount invested and investment performance. In contrast, defined benefit pensions provide a guaranteed income based on salary and years of service but are becoming increasingly rare. Recognizing the type of pension one holds is crucial for effective retirement planning, especially since defined benefit schemes are less common unless working in the public sector.
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