Always remember that investments can go down as well as up in value, so you could get back less than you put in. How you’re taxed will depend on your circumstances, and pension and tax rules can change.
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Personal pensions are a type of private pensions that you arrange yourself.
Like all pensions, the money you pay into a personal pension is put into investments (such as stocks and shares) by the pension provider. And depending on your investing savviness, you can either pick specific investments or have a fund manager do it for you.
You usually can't access the money in your pension pot until you are 55 (increases to 57 in 2028) when you can take 25% as a tax-free lump sum.
You can pay any amount into your pension each year, but you will be taxed if you:
If you don't have a workplace pension, a personal pension could be a great way to save for retirement. And even if you have a workplace pension, a personal pension in addition to your workplace pension could be a great way to grow your retirement savings faster.
Personal pensions are especially great for people who:
There are two types of personal pensions:
Another way to save into a pension is with a Lifetime ISA. A Lifetime ISA is open to adults aged 39 or younger and lets you save up to £4,000 a year towards your first home or retirement. The government will add a 25% bonus to your savings every year up to a maximum of £1,000 per year.
The government will add money to your pension contributions in the form of tax relief (free money).
For every £80 you put into your pension, the government adds £20 - and you can claim an extra £20 if you're a higher earner.
You can think of tax relief as a refund of the tax you originally paid on your pension contribution, at your usual rate of income tax - 20%, 40%, or 45%.
It's your pension provider who claims this tax relief at the basic rate and adds it to your pension. Tax relief for higher rate taxpayers is slightly different. If you're a higher rate taxpayer, you'll need to claim the additional rebate through your tax return.
Compare pension providers below:
If you are confident about picking your investments, AJ Bell Youinvest has thousands of investments for you to choose from, including shares, funds, investment trusts, and ETFs. And you can manage them online or with its mobile app. If you need help choosing, it has four ready-made portfolios and other investment ideas. AJ Bell Youinvest does not offer advice. Capital at risk. Pension rules apply.
Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. It also has several ready-made funds and expert ideas to make it easy to choose investments. Finally, Interactive Investor charges a flat fee of £19.99 per month, so you know exactly how much you will be paying each month.
Legal & General have five multi-index low-cost ready-made funds, each with a different level of risk that may suit your needs. You’ll also benefit from an easy-to-use online account.
LEARN MOREVanguard is a popular low-cost investment platform with over 70 funds. Vanguard gives you the flexibility to choose a ready-made portfolio or build your own. Each ready-made fund portfolio gives you access to thousands of bonds and shares in a single investment.
LEARN MOREAviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.
LEARN MOREStandard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.
LEARN MOREAviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.
LEARN MOREStandard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.
LEARN MOREIf you are confident about picking your investments, AJ Bell Youinvest has thousands of investments for you to choose from, including shares, funds, investment trusts, and ETFs. And you can manage them online or with its mobile app. If you need help choosing, it has four ready-made portfolios and other investment ideas. AJ Bell Youinvest does not offer advice. Capital at risk. Pension rules apply.
Interactive Investor has more than 40,000 investments to choose from, including UK and overseas shares, funds, investment trusts, and ETFs. You get a free trade every month, which you can use to buy or sell any investment. It also has several ready-made funds and expert ideas to make it easy to choose investments. Finally, Interactive Investor charges a flat fee of £19.99 per month, so you know exactly how much you will be paying each month.
Legal & General have five multi-index low-cost ready-made funds, each with a different level of risk that may suit your needs. You’ll also benefit from an easy-to-use online account.
LEARN MOREVanguard is a popular low-cost investment platform with over 70 funds. Vanguard gives you the flexibility to choose a ready-made portfolio or build your own. Each ready-made fund portfolio gives you access to thousands of bonds and shares in a single investment.
LEARN MOREAviva lets you start your Stakeholder Pension with as little as £20 a month. And you can change that amount or stop and start payments when you need to.
LEARN MOREStandard Life offers straightforward investment options for you to choose from. You can choose from two strategic lifestyle profiles, which invest your money in funds and moves them as you get closer to retirement. If you don't want to choose a fund, that's fine too. Standard Life will automatically invest your money into a Lifestyle Profile.
LEARN MORE
You can pay 100% of your earnings into your pension every year up to a maximum of £40,000. Any contribution above this will be taxed.
Yes, you can. Getting a private pension in addition to your workplace pension could be a great way to grow your retirement savings faster.
You usually can't cash in your private pension pot before you're 55 (increases to 57 in 2028), but there are some rare cases when you can, e.g., if you are too ill to work or if you have a severe illness, which means you're expected to live for less than a year.
In the case of the State Pension, the earliest you can get that is when you reach your State Pension age. If you're currently aged between 20 and 39, your State Pension age will likely be 68. If you retire before this age, you'll have to wait to claim your State Pension.
Yes, you can. When you turn 55 (increases to 57 in 2028), you can take 25% of your pension pot as a tax-free lump sum.
10% of your annual gross income is a good pension contribution, but the more you save into your pension, the better.
Most financial advisers recommend saving at least 10% of your income before tax towards your retirement. 10% might seem like a lot, but remember that it includes tax relief from the government and employer contributions if your employer contributes.
When deciding how much to contribute, remember to consider how old you'll be when you retire, your preferred retirement lifestyle, and the average number of years people spend in retirement. Have a play with the Money Advice Service's Pension Calculator to work out how changing your pension contributions at your age will affect your total retirement savings.
If you have more questions, ask the community!