What is a personal pension?
A personal pension is a kind of pension that you buy from a pension
provider such as a bank, life assurance company or building society.
It is entirely your own, which means you can continue to contribute
to it if you move jobs.
It is a good idea to consider a personal pension if you:
cannot, or do not want to, pay into an occupational pension scheme
are not working but can afford to pay for a pension
Personal pensions are money purchase schemes (also called
defined-contribution or DC schemes). As with occupational money
purchase schemes, the money you save is put into investments for
you, such as bonds or stocks and shares. When you retire, this fund
will be used to buy an annuity from an insurance company that will
give you a regular income.
What are the benefits of a personal pension?
There are several advantages to contributing to a personal pension
You don’t need to be working
to save in a personal pension scheme
You get tax relief on your contributions up to HM Revenue & Customs
limits. This broadly means that (using the basic tax rates for
2009/2010) for every £80 you pay into a personal pension, the
Government adds an extra £20. And the more you save the more you
get in tax relief
You can choose to take a tax-free lump sum of up to 25% of your
total pension when you retire
You may be able to choose the funds you invest in
Other people can pay into a personal pension on your behalf. This
means that partners or other family members can help you save
for your retirement
for more information.