Pensions can be complicated. To help you understand more, this section contains further useful information.
In order to have a financially secure retirement you will need to plan ahead.
This section contains simple information about pensions. It explains the importance of belonging to a pension plan and how this can help you achieve the standard of living you desire for your retirement.
A company pension is a regular payment that is made to an employee on retirement by an employer's pension scheme. The Government also pays pensions to people from State Pension Age.
The pension paid from the ZF UK Pension Plan is paid for life on a monthly basis. When a member dies their spouse and/or dependants could then receive a pension for the rest of their lives. At any time up to the day you retire you are able to transfer out of the ZF UK Pension Plan. This would enable you to receive your pension benefits at a time (after the minimum retirement age) and in a form which may be more suitable for your personal circumstances. This option will not be in the best interests of all members and you should seek independent financial advice before transferring out of the ZF UK Pension Plan.
The ZF UK Pension Plan is a final salary pension plan. The benefits you earned in the Plan were calculated according to a fixed formula which was broadly:
Your qualifying service in the Plan
The accrual rate of the section in which you were a member
Your final pensionable pay as defined in the Plan Rules.
The Plan is not open to any future accrual of benefits.
Once you elect to retire, your pension is paid in monthly installments for the rest of your life. If you die before your spouse, a spouse’s pension may be payable.
Planning to make the most of your retirement
When you retire your regular income, as an employee, will stop. By this point you may have paid off your mortgage and any children you have may well have left home. There will still, however, be other expenses. You will need an income in retirement if you are to maintain the lifestyle you have.
A pension can provide a regular income in retirement
There are many ways of saving money but only a pension will give you regular income on retirement.
However, the Government announced in 2014 that from 6 April 2015, people who had not yet retired would be given flexibility on how they would like to receive their pension, if their pension was ‘defined contribution’. A ‘defined contribution’ pension is a savings pot which a member can contribute into (often with their employer contributing into as well) and is invested in accordance with a member’s wishes until they retire. Formerly, when someone retired 25% of the pot could be taken as tax free cash and the remainder would generally have to be used to purchase an annuity (a monthly pension).
The requirement to purchase an annuity has now been removed and once you have reached the minimum retirement age (currently 55) you are able to receive any ‘defined contribution’ retirement savings at a time and in such amounts as you choose. You are still able to receive 25% tax free, but with further amounts received being taxed at your marginal rate.
The ZF UK Pension Plan is a ‘defined benefits’ pension, which does not allow the above flexibilities. However, you are able to Transfer Out into a ‘defined contribution’ scheme to take advantage of the flexibilities now available if you wish. You must receive appropriate financial advice before you transfer out as it may not be in your best interests to do so.
Reducing State provision
State pensions have been reduced over recent years and the Government is trying to encourage individuals to take responsibility for their own retirement provision. Relying on the State could mean you will not have the income you desire in your retirement.