Where Does It Go? - UK Money Blog £

A fund established by an employer to facilitate and organize the investment of employees’ retirement funds contributed by the employer and employees. The pension fund is a common asset pool meant to generate stable growth over the long term, and provide pensions for employees when they reach the end of their working years and commence retirement.

Pensions aren’t often thought of by people under 30, although it is worth if you are thinking of setting up a pension to look at it as early as possible, since the earlier you start the more annual income you will collect from the pension once it matures.

A recent article in the Observer claimed:

If you are in your thirties, are contributing a £100 a month or less to your pension and are planning to retire when you hit 65, look away now: your pension will be worth a pittance.

The State Pension Age (SPA) in the UK is currently 60 for women and 65 for men. However, this is increasing so that if you are born from 1978 onwards, you will retire at 68 (2046 if you were born in 1978) More details are at the Pensions Advisory Service.

Research from Virgin Money shows that flat-rate private pension contributions of £100 a month made by a 30-year-old man now will only be worth the equivalent of an annual income of £3,150 a year in today’s money by the time he retires

Its pretty established that thinking about pensions before you hit 30 is a good idea; but whats available? Might it not be better to use that £100 a month towards over investments, such as paying your mortgage off earlier?

In trying to answer that question, lets look at what is available to UK citizens as of today:

• Occupational pension schemes are pension arrangements that are set up by employers to provide income in retirement for their employees. Although the employer is responsible for sponsoring the scheme, it is actually run by a board of trustees - with the exception of some public sector schemes.
• Personal Pension Plan is an investment policy for retirement, designed to offer a lump sum and income in retirement. It is available to any United Kingdom resident who is under 75 years of age and can be bought from insurance companies, high street banks, investment organisations and some retailers (i.e. supermarkets and high street shops). You do not need to be employed.
• State Pension is administered and paid by the Pension Service, part of the Department for Work & Pensions. It is a social security benefit most people are eligible for at retirement age if you have payed enough National Insurance contributions. The full basic State Pension is £90.70 per week in 2008-2009 - £4,716.40 annual income.

Occupational pension schemes come in two main types - final salary schemes and money purchase schemes.

Personal Pension Plans have a variation called Stakeholder Pension Schemes.

State Pension holder can also qualify for other benefits such as the Winter Fuel Payment.