Guides: pensions
Personal pensions
Pensions are long-term investments designed to help ensure that you have enough income in retirement. The government encourages you to save towards your own personal pension by offering 'tax relief' on your contributions so they are a cost effective way to save for your retirement.
Anyone under the age of 75 can have a pension as long as they are resident in the UK. With a personal pension you pay a regular amount or a lump sum to the pension provider who will invest it on your behalf. Pensions providers can be banks, building societies or insurance companies.
How much can you pay in to your pension?
You can pay as much as you like into your pension as long as your contributions are not more than 100% of your total earnings. The other limit you need to keep an eye on is your lifetime allowance. This is the maximum you can hold in any type of pension and still enjoy the tax privileges associated with pensions.
Are there any associated charges?
There will typically be an Annual Management Charge (AMC) charged by most pension providers which is usually between 0.3% to 1.5%. This covers the administration and investment costs of the plan. Some providers have tiered AMCs, so that as your fund grows, the AMC gradually falls.
Taking your pension
The earliest age you can take your personal pension is 55. Most people choose to wait until they are 60 or 65, but you do not have to retire from work to get your pension benefits. You can also put off taking your pension until you are 75.
There are certain circumstances that will allow you to take your pension before you are 55. Your pension scheme provider will be able to tell you what your scheme allows.
