As people develop through their lifetime they have an expectation that a time will come when they will be able to retire. For some people the State pension is sufficient to provide a basic level of income. Others may have an opportunity to accumulate wealth without using pension schemes – perhaps through their business ventures or other assets. But most people will want to supplement what they have with some form of pension scheme. Many employers also take the view that, while their employees are working, they should be building up an entitlement to a pension when they retire.
Pension arrangements have a number of advantages:
- when people come to retire they will experience a reduction in income – a pension makes up for some of this loss of income in retirement;
- pension schemes can provide protection in the form of lump sums and pensions to dependents in the event of a member’s death;
- in order to encourage pension schemes, the State provides tax relief on contributions made to pension schemes and the growth in their investments.
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