Pensions Basics
What is a pension?
Pensions are designed to give you a regular income when you retire.
How do they work?
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Income
Contributions are paid by an individual (personal pension arrangement) or by an individual and their employer (occupational scheme). Some income may also come from transfers from other schemes.
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Growth of the fund
Contributions are invested, along with investment returns and proceeds from the sale of investments, to increase the value of the fund.
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Expenditure
Pensions and other benefits to members and their dependants are paid out of the fund.
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State pensions work differently in that they are paid from current contributions made by taxable employees.
What are the alternatives?
There are other ways to save for your retirement, including ISAs, unit trusts and investments in Government bonds and stocks and shares. Go to Other Savings Options for a description of some alternatives.