Personal Pensions

A personal pension is a retirement savings plan that individuals can set up to save for their future financial needs once they stop working. It’s a way to build up a fund that will provide you with an income in your retirement years, supplementing any state or employer pensions you may receive.

Here’s how personal pensions work and some key concepts to understand:

  1. Contributions: You (and your employer, if applicable) make regular contributions to your personal pension fund. These contributions can be invested in a variety of assets, such as stocks, bonds, and funds.
  2. Tax Relief: One of the attractive features of personal pensions is the tax relief on contributions. When you contribute to your pension, the government adds money to your pension pot through tax relief. This means that for every amount you contribute, the government adds a percentage on top, based on your income tax rate. For example, if you’re a basic rate taxpayer in the UK, for every £100 you contribute, the government adds £25, making your total contribution £125.
  3. Investment Growth: The money in your pension pot is invested with the aim of growing over time. The growth potential and risks depend on the investments you choose. It’s important to regularly review and manage your investment choices to align with your retirement goals and risk tolerance.
  4. Retirement Options: When you reach retirement age (which may vary depending on your country’s regulations), you have several options for accessing the money in your pension pot. These options might include taking a portion as a tax-free lump sum, using the rest to purchase an annuity that provides a regular income, or entering into a drawdown arrangement where you can withdraw money as needed.
  5. Portability: Personal pensions are typically portable, which means you can continue contributing to your pension even if you change jobs or become self-employed. You can consolidate different pension pots into one if you wish to simplify your retirement planning.
  6. Annuities: An annuity is a product that you can purchase with your pension savings to provide a guaranteed income for life. Annuities can offer financial security but might not keep up with inflation over time.
  7. Flexibility: Some personal pensions offer flexible options, such as being able to adjust your contributions or take irregular withdrawals once you’re in retirement.
  8. Pension consolidation advice is available. If you hold a Defined Benefit Pension Scheme or Defined Contribution pension with a guaranteed minimum pension or income, any advice you receive will be through a dedicated referral advice service and a specialist within our network.

It’s important to remember that the value of investments can go up as well as down, and there are risks associated with pension investments. Consulting a financial adviser is recommended to make informed decisions based on your personal circumstances and retirement goals.


The value of investments and any income from them can fall as well as rise and you may not get back the original amount invested. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.