Ian Chapman-Curry
Legal Director
PSL legal director
Podcast
5
Pension provision in the UK has evolved over the past 100 years. This long period of organic development has created a complicated system with plenty of jargon and abbreviations.
This overview provides a basic framework for understanding pensions in the UK and sets the scene for the rest of this series of fact cards.
The UK's state pension previously consisted of two tiers of provision: the Basic State Pension and the Additional State Pension. In 2016, this was replaced by a Single-tier State Pension.
The state pension is a contributory system based on National Insurance contributions. In addition, universal old age benefits are provided through the safety net of Pension Credits.
Private pensions include:
Occupational pension schemes are set up by employers to provide retirement benefits for their employees. They are typically trust based arrangements.
Personal pension schemes are typically contract-based arrangements set up with an insurance provider or other financial services company.
There are two main types of pension benefits:
There has also been a lot of policy debate about a shared risk pension scheme (also referred to as defined ambition). As yet, these ideas have not been realised.
Another division between types of pension arrangement is whether they are provided through a trust or under a contract.
Trustees hold pension scheme assets for the benefit of scheme beneficiaries. The terms of trust are set out in trust documents (often referred to as the trust deed and rules).
Trustees are under a duty to act in line with the trust documents and the law and in the interests of beneficiaries of the scheme.
Trust-based schemes are regulated by The Pensions Regulator.
Contract-based schemes are individual arrangements set up by a contract between an insurance company (or another financial institution) and an individual.
Contract-based schemes are regulated by the Financial Conduct Authority.
Pensions are an integral component of many employers' benefit packages. They are provided:
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