A pension is a fund into which a sum of money is added during an employee's employment years, from which payments are drawn to support the person's retirement from work in the form of periodic payments. A pension may be a "defined benefit plan" where a fixed sum is paid to a person, or a "defined contribution plan" under which a fixed sum is invested and becomes available at retirement age. Pensions should not be confused with severance pay; the terms "retirement plan" and "superannuation" tend to refer to a pension granted upon retirement of the individual. Retirement plans may be set up by employers, insurance companies, the government or other institutions such as employer associations or trade unions. Called retirement plans in the United States, they are known as pension schemes in the United Kingdom and Ireland and superannuation plans in Australia and New Zealand. Retirement pensions are in the form of a guaranteed life annuity, thus insuring against the risk of longevity. A pension created by an employer for the benefit of an employee is referred to as an occupational or employer pension.
Labor unions, the government, or other organizations may fund pensions. Occupational pensions are a form of deferred compensation advantageous to employee and employer for tax reasons. Many pensions contain an additional insurance aspect, since they will pay benefits to survivors or disabled beneficiaries. Other vehicles may provide a similar stream of payments; the common use of the term pension is to describe the payments a person receives upon retirement under pre-determined legal or contractual terms. A recipient of a retirement pension is known as a retiree. A retirement plan is an arrangement to provide people with an income during retirement when they are no longer earning a steady income from employment. Retirement plans require both the employer and employee to contribute money to a fund during their employment in order to receive defined benefits upon retirement, it is a tax deferred savings vehicle that allows for the tax-free accumulation of a fund for use as a retirement income. Funding can be provided in other ways, such as from labor unions, government agencies, or self-funded schemes.
Pension plans are therefore a form of "deferred compensation". A SSAS is a type of employment-based Pension in the UK; some countries grant pensions to military veterans. Military pensions are overseen by the government. Ad hoc committees may be formed to investigate specific tasks, such as the U. S. Commission on Veterans' Pensions in 1955–56. Pensions may extend past the death of the veteran himself, continuing to be paid to the widow. Many countries have created funds for their citizens and residents to provide income when they retire; this requires payments throughout the citizen's working life in order to qualify for benefits on. A basic state pension is a "contribution based" benefit, depends on an individual's contribution history. For examples, see National Insurance in the UK, or Social Security in the United States of America. Many countries have put in place a "social pension"; these are tax-funded non-contributory cash transfers paid to older people. Over 80 countries have social pensions.
Some are universal benefits, given to all older people regardless of income, assets or employment record. Examples of universal pensions include New Zealand Superannuation and the Basic Retirement Pension of Mauritius. Most social pensions, are means-tested, such as Supplemental Security Income in the United States of America or the "older person's grant" in South Africa; some pension plans will provide for members in the event they suffer a disability. This may take the form of early entry into a retirement plan for a disabled member below the normal retirement age. Retirement plans may be classified as defined benefit or defined contribution according to how the benefits are determined. A defined benefit plan guarantees a certain payout at retirement, according to a fixed formula which depends on the member's salary and the number of years' membership in the plan. A defined contribution plan will provide a payout at retirement, dependent upon the amount of money contributed and the performance of the investment vehicles utilized.
Hence, with a defined contribution plan the risk and responsibility lies with the employee that the funding will be sufficient through retirement, whereas with the defined benefit plan the risk and responsibility lies with the employer or plan managers. Some types of retirement plans, such as cash balance plans, combine features of both defined benefit and defined contribution plans, they are referred to as hybrid plans. Such plan designs have become popular in the US since the 1990s. Examples include Cash Pension Equity plans. A traditional defined benefit plan is a plan in which the benefit on retirement is determined by a set formula, rather than depending on investment returns. Government pensions such as Social Security in the United States are a type of defined benefit pension plan. Traditionally, defined benefit plans for employers have been administered by institutions which exist for that purpose, by large businesses, or, for government workers, by the government itself. A traditional form
A tax is a mandatory financial charge or some other type of levy imposed upon a taxpayer by a governmental organization in order to fund various public expenditures. A failure to pay, along with resistance to taxation, is punishable by law. Taxes may be paid in money or as its labour equivalent. Most countries have a tax system in place to pay for public, common or agreed national needs and government functions; some levy a flat percentage rate of taxation on personal annual income, but most scale taxes based on annual income amounts. Most countries charge a tax both on corporate income and dividends. Countries or subunits also impose wealth taxes, property taxes, sales taxes, value-added taxes, payroll taxes or tarrifs; the legal definition, the economic definition of taxes differ in some ways such as economists do not regard many transfers to governments as taxes. For example, some transfers to the public sector are comparable to prices. Examples include, tuition at public universities, fees for utilities provided by local governments.
Governments obtain resources by "creating" money and coins, through voluntary gifts, by imposing penalties, by borrowing, by confiscating wealth. From the view of economists, a tax is a non-penal, yet compulsory transfer of resources from the private to the public sector, levied on a basis of predetermined criteria and without reference to specific benefit received. In modern taxation systems, governments levy taxes in money; the method of taxation and the government expenditure of taxes raised is highly debated in politics and economics. Tax collection is performed by a government agency such as the Ghana Revenue Authority, Canada Revenue Agency, the Internal Revenue Service in the United States, Her Majesty's Revenue and Customs in the United Kingdom or Federal Tax Service in Russia; when taxes are not paid, the state may impose civil penalties or criminal penalties on the non-paying entity or individual. The levying of taxes aims to raise revenue to fund governing or to alter prices in order to affect demand.
States and their functional equivalents throughout history have used money provided by taxation to carry out many functions. Some of these include expenditures on economic infrastructure, scientific research and the arts, public works, data collection and dissemination, public insurance, the operation of government itself. A government's ability to raise taxes is called its fiscal capacity; when expenditures exceed tax revenue, a government accumulates debt. A portion of taxes may be used to service past debts. Governments use taxes to fund welfare and public services; these services can include education systems, pensions for the elderly, unemployment benefits, public transportation. Energy and waste management systems are common public utilities. According to the proponents of the chartalist theory of money creation, taxes are not needed for government revenue, as long as the government in question is able to issue fiat money. According to this view, the purpose of taxation is to maintain the stability of the currency, express public policy regarding the distribution of wealth, subsidizing certain industries or population groups or isolating the costs of certain benefits, such as highways or social security.
Effects can be divided in two fundamental categories: Taxes cause an income effect because they reduce purchasing power to taxpayers. Taxes cause a substitution effect when taxation causes a substitution between taxed goods and untaxed goods. If we consider, for instance, two normal goods, x and y, whose prices are px and py and an individual budget constraint given by the equation xpx + ypy = Y, where Y is the income, the slope of the budget constraint, in a graph where is represented good x on the vertical axis and good y on the horizontal axes, is equal to -py/px; the initial equilibrium is in the point, in which budget constraint and indifference curve are tangent, introducing an ad valorem tax on the y good, the budget constraint's slope becomes equal to -py/px. The new equilibrium is now in the tangent point with a lower indifferent curve; as can be noticed the tax's introduction causes two consequences: It changes the consumers' real income It raises the relative price of y good. The income effect shows the variation of y good quantity given by the change of real income.
The substitution effect shows the variation of y good determined by relative prices' variation. This kind of taxation can be considered distortionary. Another example can be the Introduction of an income lump-sum tax, with a parallel shift downward of the budget constraint, can be produced a higher revenue with the same loss of consumers' utility compared with the property tax case, from another point of view, the same revenue can be produced with a lower utility sacrifice; the lower utility or the lower revenue given by a distortionary tax are called excess pressure. The same result, reached with an income lump-sum tax, can be obtained with these following types of taxes (all of them cause only a budget constraint's shift without causi
The United Kingdom the United Kingdom of Great Britain and Northern Ireland, sometimes referred to as Britain, is a sovereign country located off the north-western coast of the European mainland. The United Kingdom includes the island of Great Britain, the north-eastern part of the island of Ireland, many smaller islands. Northern Ireland is the only part of the United Kingdom that shares a land border with another sovereign state, the Republic of Ireland. Apart from this land border, the United Kingdom is surrounded by the Atlantic Ocean, with the North Sea to the east, the English Channel to the south and the Celtic Sea to the south-west, giving it the 12th-longest coastline in the world; the Irish Sea lies between Great Ireland. With an area of 242,500 square kilometres, the United Kingdom is the 78th-largest sovereign state in the world, it is the 22nd-most populous country, with an estimated 66.0 million inhabitants in 2017. The UK is constitutional monarchy; the current monarch is Queen Elizabeth II, who has reigned since 1952, making her the longest-serving current head of state.
The United Kingdom's capital and largest city is London, a global city and financial centre with an urban area population of 10.3 million. Other major urban areas in the UK include Greater Manchester, the West Midlands and West Yorkshire conurbations, Greater Glasgow and the Liverpool Built-up Area; the United Kingdom consists of four constituent countries: England, Scotland and Northern Ireland. Their capitals are London, Edinburgh and Belfast, respectively. Apart from England, the countries have their own devolved governments, each with varying powers, but such power is delegated by the Parliament of the United Kingdom, which may enact laws unilaterally altering or abolishing devolution; the nearby Isle of Man, Bailiwick of Guernsey and Bailiwick of Jersey are not part of the UK, being Crown dependencies with the British Government responsible for defence and international representation. The medieval conquest and subsequent annexation of Wales by the Kingdom of England, followed by the union between England and Scotland in 1707 to form the Kingdom of Great Britain, the union in 1801 of Great Britain with the Kingdom of Ireland created the United Kingdom of Great Britain and Ireland.
Five-sixths of Ireland seceded from the UK in 1922, leaving the present formulation of the United Kingdom of Great Britain and Northern Ireland. There are fourteen British Overseas Territories, the remnants of the British Empire which, at its height in the 1920s, encompassed a quarter of the world's land mass and was the largest empire in history. British influence can be observed in the language and political systems of many of its former colonies; the United Kingdom is a developed country and has the world's fifth-largest economy by nominal GDP and ninth-largest economy by purchasing power parity. It has a high-income economy and has a high Human Development Index rating, ranking 14th in the world, it was the world's first industrialised country and the world's foremost power during the 19th and early 20th centuries. The UK remains a great power, with considerable economic, military and political influence internationally, it is sixth in military expenditure in the world. It has been a permanent member of the United Nations Security Council since its first session in 1946.
It has been a leading member state of the European Union and its predecessor, the European Economic Community, since 1973. The United Kingdom is a member of the Commonwealth of Nations, the Council of Europe, the G7, the G20, NATO, the Organisation for Economic Co-operation and Development and the World Trade Organization; the 1707 Acts of Union declared that the kingdoms of England and Scotland were "United into One Kingdom by the Name of Great Britain". The term "United Kingdom" has been used as a description for the former kingdom of Great Britain, although its official name from 1707 to 1800 was "Great Britain"; the Acts of Union 1800 united the kingdom of Great Britain and the kingdom of Ireland in 1801, forming the United Kingdom of Great Britain and Ireland. Following the partition of Ireland and the independence of the Irish Free State in 1922, which left Northern Ireland as the only part of the island of Ireland within the United Kingdom, the name was changed to the "United Kingdom of Great Britain and Northern Ireland".
Although the United Kingdom is a sovereign country, Scotland and Northern Ireland are widely referred to as countries. The UK Prime Minister's website has used the phrase "countries within a country" to describe the United Kingdom; some statistical summaries, such as those for the twelve NUTS 1 regions of the United Kingdom refer to Scotland and Northern Ireland as "regions". Northern Ireland is referred to as a "province". With regard to Northern Ireland, the descriptive name used "can be controversial, with the choice revealing one's political preferences"; the term "Great Britain" conventionally refers to the island of Great Britain, or politically to England and Wales in combination. However, it is sometimes used as a loose synonym for the United Kingdom as a whole; the term "Britain" is used both as a synonym for Great Britain, as a synonym for the United Kingdom. Usage is mixed, with the BBC preferring to use Britain as shorthand only for Great Britain and the UK Government, while accepting that both terms refer to the United K
Pensions in the United Kingdom
Pensions in the United Kingdom can be categorised into three major divisions and seven sub-divisions, covering both defined benefit and defined contribution pensions.: State pensions Basic State Pension State Second Pension Occupational pensions Defined benefit pension Defined contribution pension Individual/personal pensions Stakeholder pensions Group personal pensions Self-invested personal pensionsPersonal accounts, automatic enrolment and the minimum employer contribution are new categories which joined these from 2012. Automatic enrolment has been successful, but there are a number of myths remaining around the scheme, which professional bodies and companies are working to eradicate; the state provides basic pension provision intended to prevent poverty in old age. Until 2010 men over the age of 65 and women over the age of 60 were entitled to claim state pension. Longer-term, the retirement age for both men and women will rise to 68 by no than 2046 and much earlier; the basic state pension known as the "Old Age Pension" was introduced in the United Kingdom in January 1909.
A pension of 5 shillings per week, or 7s.6d per week for a married couple, was payable to a person with an income below £21 per annum, following the passage of the Old-Age Pensions Act 1908. The qualifying age was 70, the pensions were subject to a means test; until the 20th century, poverty was seen as a quasi-criminal state, this was reflected in the Vagabonds and Beggars Act 1494 that imprisoned beggars. In Elizabethan times, English Poor Laws represented a shift whereby the poor were seen as morally degenerate, were expected to perform forced labour in workhouses; the beginning of the modern state pension was the Old-Age Pensions Act 1908, which provided 5 shillings a week for those over 70 whose annual means did not exceed £31 10s.. It coincided with the Royal Commission on the Poor Laws and Relief of Distress 1905–09 and was the first step in the Liberal welfare reforms towards the completion of a system of social security, with unemployment and health insurance through the National Insurance Act 1911.
After the Second World War, the National Insurance Act 1946 completed universal coverage of social security. The National Assistance Act 1948 formally abolished the poor law, gave a minimum income to those not paying National Insurance; the early 1990s established the existing framework for state pensions in the Social Security Contributions and Benefits Act 1992 and Superannuation and other Funds Act 1992. Following the respected Goode Report, occupational pensions were covered by comprehensive statutes in the Pension Schemes Act 1993 and the Pensions Act 1995. In 2002 the Pensions Commission was established as a cross-party body to review pensions in the United Kingdom; the first Act to follow was the Pensions Act 2004, which updated regulation by replacing the Occupational Pensions Regulatory Authority with the Pensions Regulator and relaxing the stringency of minimum funding requirements for pensions, while ensuring protection for insolvent businesses. In a major update of the state pension, the Pensions Act 2007 raised retirement ages.
Since the Pensions Act 2008 has set up automatic enrolment for occupational pensions, a public competitor designed to be a low-cost and efficient fund manager, called the National Employment Savings Trust. The Act amended the timetable for increasing the state pension age to 66. Under the PA 2007, the increase to 66 was due to take effect between 2024 and 2026; this Act brought forward the increase, so that state pension age for both men and women will begin rising from 65 in December 2018 to reach 66 by October 2020. As a result of bringing forward the increase to 66, the timetable contained in the PA 1995 for equalising women's and men's state pension ages at 65 by April 2020 will be accelerated, so that the women's state pension age reaches 65 by November 2018; the Act introduced amendments to primary legislation to amend the regulatory framework for the duty on employers to automatically enrol eligible workers into a qualifying pension scheme and to contribute to the scheme. These measures implemented recommendations from the Making Automatic Enrolment Work review and revised some of the automatic enrolment provisions in the PA 2008.
The Act amended existing legislation that provided for revaluation or indexation of occupational pensions and payments by the Pension Protection Fund. The Act defined "money purchase benefits" for the purpose of pensions law; this was a consequence of the judgment of the Supreme Court in Houldsworth v Bridge Trustees and Secretary of State for Work and Pensions. The Act took powers to make transitional, consequential or supplementary provision as well and to make further amendments to the definition of "money purchase benefits"; the Act introduced provisions into the current judicial pension schemes to allow contributions to be taken towards the cost of providing personal pension benefits to members of those schemes. The Act contained a number of measures to correct particular references in the existing body of pensions-related legislation and other small and technical measures to both state and private pension legislation; this included the following measures: increased flexibility in the date of consolidation of additional state pension.