Navigating the Pension Minefield

Lisa Smith, BA (Hons), CeFA

Life is full of choices, every day we make decisions based upon knowledge accrued previously, but when there are too many options – and options within options – things can get confusing, and the requirement for consultation and research becomes prevalent.

The right pension scheme choice depends upon personal circumstance, and indeed there is a fit for everyone. However, the key when selecting the pension plan most appropriate is evaluation of both lifestyle requirements and budget.


From a Qualifying Recognised Overseas Pension Scheme (QROPS) to a Self Invested Personal Pension (SIPP), there are various criteria that must be met in order to be able to take out a specific plan. For example a QROPS is only available if plans are in place to live overseas or for existing expats, and a UK pension is in place which is eligible for transfer, while a SIPP is a good bet for somebody in self-employment.

Private Pensions are for many, the number one choice for investing in securing the future, but once again research and reliable advice are two extremely important factors to ensure that the correct product is taken. Private Pension schemes should always provide access when required, and an adequate amount to retire comfortably. If they are unable to provide these two aspects, there is no real benefit in proceeding.

When in employment, a Defined Benefits Pension Scheme guarantees- or at least promises – a final salary upon retirement or a specific income, however as these plans became unsustainably expensive in the 90’s, they are few and far between in the UK now.

Employment Schemes

More common these days among those in employment is a defined contribution scheme which pays out an amount reliant on various considerations. Pension performance within the stock market and the amount contributed are the two most prominent considerations before withdrawal is calculated.

A defined contribution scheme is not the only employer-based one out there, other popular examples are multi-employer schemes, NOW: Pensions, and the People’s Pension scheme. These schemes all have regulations and charges attached to them which differentiate significantly from one scheme to the next, some schemes also have different rules regarding when the saver is able to contribute. Many employees choose to not only make use of one of the aforementioned options, they also pay into a private pension scheme in addition to increase the amount available later on in life.

There are certain schemes which will allow you to be able to transfer between funds with no attached charges, there are others which charge exorbitantly. There are some schemes which allow those who are self-employed to join, there are others that forbid this.

Before making any decision on which pension fund to invest in, it is recommended that a consultation is entered into with a finance professional to offer guidance and advice.

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