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Best Pension Providers - Personal Pensions

Updated On:
Mar 6, 2021
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· 5 min read
Best Pension Providers - A couple discussing over tea

Contents:

What is a Personal Pension

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:

  • Contribute more than £40,000 in one year - this is your annual allowance, and you can usually carry forward any unused allowance for up to three years.
  • Contribute more than 100% of your earnings in one year.
  • Exceed your lifetime allowance - £1,073,100 in your lifetime.

Why Choose a Personal Pension

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:

  • Are self-employed,
  • Do not qualify for a workplace pension, or
  • Have a workplace pension but want to save into a private pension plan separate from their workplace pension.

Types of Personal Pension

There are two types of personal pensions:


  1. Self-invested Personal Pensions (SIPPs)
    SIPPs give you the flexibility to choose the specific investments that make up your pension fund. Depending on your pension provider, you'll have the option to either select individual investments and manage your portfolio yourself or choose from a range of ready-made portfolios.

    A ready-made portfolio is a diverse mix of investments created by fund managers to help reduce the burden of choosing individual investments. With one ready-made portfolio, you could have access to thousands of investments.
  1. Stakeholder Pensions 
    Stakeholder pensions can be of particular benefit if you're self-employed or on a low income. Their key features include:
  • ~~Capped charges,
  • ~~Free transfers, 
  • ~~Low minimum contributions,
  • ~~Flexible contributions (you can stop and start payments when you want), and 
  • ~~A default investment fund (if you don't want to choose investments).

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.

Tax Relief on Personal Pension

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.

How to Choose a Personal Pension

  1. Shop around for pension providers before you make any commitment. Go to each provider's website you are interested in and take a look at the investments and types of services they offer. Ask for the key features document for each pension plan you are considering.
  2. Consider pension charges carefully. Charges may include administration fees, fund management costs, transfer charges, and penalties for missed payments. Be sure to check what charges you'll have to pay and when.
  3. Check that your pension provider is registered with the Financial Conduct Authority (FCA) or the Pensions Regulator if it's a stakeholder pension. The FCA or the Pensions Regulator regulates all of the pension providers listed on Koody.
  4. If you are unsure or need some guidance, get proper advice from a regulated independent financial adviser.
  5. Beware of scammers. If something sounds too good to be true, it most likely is. Also, if someone shows you a way to withdraw your pensions before you are 55, it's most likely a pension scam. You can learn more out about pension scams on the Pension Wise website.

Best Pension Providers

Compare pension providers below:


AJ Bell Youinvest
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£1,000 lump-sum. No minimum for a regular payment
Annual Platform Fee
0.25% - 0% (capped at £10 per month for shares)

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.

LEARN MORE
Interactive Investor
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£0
Annual Platform Fee
 £240 (£19.99 per month)

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.

LEARN MORE
Legal & General's Logo
Product
SIPP
Account Type
Ready-made
Minimum Contribution
£100
Annual Platform Fee
0.25%

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 MORE
Vanguard Investor'
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£500 lump sum or £100 per month
Annual Platform Fee
0.15% (capped at £375 per year)

Vanguard 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 MORE
Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva 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 MORE
Standard Life
Product
Stakeholder Pension
Account Type
Self-select & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard 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
Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva 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 MORE
Standard Life
Product
Stakeholder Pension
Account Type
Self-select & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard 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
AJ Bell Youinvest
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£1,000 lump-sum. No minimum for a regular payment
Annual Platform Fee
0.25% - 0% (capped at £10 per month for shares)

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.

LEARN MORE
Interactive Investor
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£0
Annual Platform Fee
 £240 (£19.99 per month)

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.

LEARN MORE
Legal & General's Logo
Product
SIPP
Account Type
Ready-made
Minimum Contribution
£100
Annual Platform Fee
0.25%

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 MORE
Vanguard Investor'
Product
SIPP
Account Type
Self-select & Ready-made
Minimum Contribution
£500 lump sum or £100 per month
Annual Platform Fee
0.15% (capped at £375 per year)

Vanguard 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 MORE
Aviva's Logo
Product
Stakeholder Pension
Account Type
Ready-made
Minimum Contribution
£20 per month
Annual Fund Management Cost
Capped at 1%

Aviva 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 MORE
Standard Life
Product
Stakeholder Pension
Account Type
Self-select & Ready-made
Minimum Contribution
£16
Annual Fund Management Cost
Capped at 1%

Standard 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

Frequently Asked Questions

1. How much can I pay into my pension each year?

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.

2. Can I have a private pension and a workplace pension?

Yes, you can. Getting a private pension in addition to your workplace pension could be a great way to grow your retirement savings faster.

3. Can you withdraw money from a private pension?

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.

4. Can I take my pension as a lump sum?

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.

5. What is a good pension contribution?

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!

You might also like 🤓

  1. Self-employed Pension
  2. Best Pension for Self-employed people
  3. Stakeholder Pension
  4. Workplace Pension
  5. Introduction to Pensions
  6. Stocks & Shares Charges ISA Calculator

Credits

  1. Gov.uk
  2. Money Advice Service
  3. Citizens Advice


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