The benefits of a personal pension plan include aggressively saving for retirement with larger contributions than traditional plans allow, the ability to set up and determine contributions based on the desired level of retirement income, and providing a retirement savings option for those who are self-employed and cannot join a group plan, according to Charles Schwab. Additionally, contributions are typically 100 percent tax deductible.Continue Reading
Personal pension plans typically fall into two categories, defined-contribution plans and defined-benefit plans, as CanDoFinance explains. While defined-contribution plans offer the account holder the option to set aside a certain amount or percentage of earnings, defined-benefit plans guarantee that account holders receive a certain payment amount upon retirement. These plans also allow account holders to have an active role in their investments. Private pensions also don't have as stringent regulations as employer-provided plans or Social Security. For example, these plans don't typically take a secondary income into account when determining when the account holder can begin to make withdrawals or receive benefits.
Other benefits of personal pension plans include the ability to diversify investments and the elimination of some of the fees associated with professional investment management, as pointed out by U.S. News and World Report. Also, the benefits from personal pension plans do not affect the amount of Social Security benefits an account holder can receive, notes CanDoFinance, and account holders can receive benefits from Social Security and a personal pension plan simultaneously without either affecting the other.Learn more about Financial Planning