Being aware of pension pitfalls

Know about pensions and its nuances.

05:23 14 November 2013

Your pension is an income you can rely on once you have retired; unfortunately sometimes people fall victim to schemes.  Taking time to gain a deeper understanding of how pensions work will help you recognize foul play and take steps to protect yourself. There are two different types of pension:

 

• Occupational Pensions are an income you receive as a result of working in a particular place for a certain number of years. There are two ways you can build up an occupational pension:

 

-Contribution pensions, also known as money purchase pensions, are created through collaboration between employee and employer. Over the years, you continue to contribute and watch your money grow. The amount you earn is impacted by annuity rates and deducted charges.

 

-Salary pensions promise employees an income once they have retired. The income is usually much less than what an employee was earning while they held their job.

 

• State Pensions are money provided to retired individuals. While people generally do not have a problem with fraudulent activity with their pensions, standards around receiving pensions are adjusted occasionally. Two ways that the government changes state pension are:

 

-The state can choose to cut back the amount of money you will receive or the age you will begin to receive your money.

 

-The government has recently revealed that they will adjust the pension release age to correlate to an individual’s life expectancy.

 

Because employees were being taken advantage of and having their pensions stolen, tighter regulations have been established. A national Fraud Compensation Fund (FCF) has been established under the Pensions Act 2004 to help refund pensions that have been taken through fraudulent activity.

 

You can never be entirely sure that your pension will be full proof, however there are many measures taken to avoid disaster. You can talk to your pension provider for more information and they should answer any questions or concerns you have.