PENSIONS

Personal pensions

Because most employees will change employers throughout their working lives many prefer to set up personal, "portable" pensions of their own. Those who are self-employed also do so of course.

In this case, as with defined contribution schemes, monthly contributions are set aside in the pension plan over the holders working life and used to purchase an annuity on retirement.

One of the great attractions of pension schemes as a method of saving for retirement is that contributions are tax free up to government set contributions limits. There is no other investment you can make which will give you an instant 20 or 50 per cent benefit depending on the highest rate of tax you pay.

Which sounds most appealing, paying tax to the government or saving it for your old age?