Pension Companies

By: EconomyWatch   Date: 9 October 2009

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With the advancement in the global financial sector, a number of pension companies have emerged on the scene to provide retirement solutions. These companies function parallel to the state pension authority and are regulated by the state laws governing social security sector. An individual can buy retirement products from private pension companies to ensure additional retirement benefits or to make tax-deferred investments.

Types of Pension Companies

There commonly are four types of pension companies existing in the market:

·        Co-operatives or trusts

·        Banking institutions

·        Insurance companies

·        Investment companies

Pension plans available with private companies include:

·        Occupational pension: These policies are provided by the employer to all qualifying employees. Occupational plans are of four types – final salary, money purchase, group personal plan or group stockholders plan.

·        Personal pension: An individual can buy a personal pension plan from any pension service provider. It involves buying an annuity from the pension pot at the time of retirement, which will pay for regular income till death or even after that. Self invested personal pension (SIPP) is a type of personal pension scheme that allows an individual to regulate his investment portfolio.

How to Choose Among the Pension Companies

Unlike traditional state plans that offer definite income, policies from private pension companies involve higher level of risk. Thus, one has to remain skeptical while choosing among the various pension companies.

Here are some essential tips to follow while shopping for pension policies:

·        Buy retirement plans from reputed private pension companies only.

·        Ensure the financial soundness of the pension company before making an investment.

·        Track the fiscal performance of the company over the past five years. One can look for stocks value, total assets and fiscal rating of the company to make an informed decision.

·        Search for retirement products from different pension companies.

·        Compare different products in terms of interest rates and retirement benefits to get the best deal.

·        Get information about investment pattern of the company as it define investors’ retirement benefits.

·        Although track funds offer low interest rates, they guarantee safe returns. However, actively managed funds are highly risk-prone. Thus, buy a pension plan from a company that offers a wide range of investment options.

·        Look for processing charges as applicable on each scheme.


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