Personal Pensions

Personal Pensions

A personal pension is a type of defined contribution pension. You choose the provider and decide for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.

Tax relief

Your pension provider will claim tax relief at the basic rate and add it to your pension pot.

If you’re a higher rate tax payer, you’ll need to claim the additional rebate through your tax return.

How they work

Your pension pot builds up in line with the contributions you make, investment returns and tax relief. 

It helps to think of defined­ contribution pensions as having two stages:

  • The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire.  You can usually choose from a range of funds to invest in. Remember that the value of investments might go up or down.
  • The size of your pension pot when you retire will depend on:
    • How long you save for
    • How much you pay into your pension pot
    • How well your investments have performed
    • How much, if anything, your employer pays in
    • What charges have been taken out of your pot by your pension provider.

Following changes introduced in April 2015 you now have more choice and flexibility than ever before over how and when you can take money from your pension pot.

Personal pensions at work

A personal pension might be offered through your employer.  These are called group personal pensions.

Changing jobs

If you change jobs, check when your new employer will enrol you into a workplace pension scheme.

You can continue paying into an existing personal pension, but you might find you’ll be better off joining your employer’s workplace pension scheme, especially if your employer contributes.

Compare the benefits available through your employer’s scheme with your personal pension.

If you decide to stop paying into a personal pension, you can leave the pension pot to carry on growing but check if there are extra charges for doing this.