Personal Pension

What is a Personal Pension?

A Personal Pension is a long-term investment that you build-up during working life so that your retirement is not spent worrying about money.

With this defined contribution pension, you can choose how much and when to make contributions. The money paid into a personal pension scheme is invested to build up a pot of money for retirement.

You get tax relief on the eligible personal contributions you make into your pension. Which means that income tax your normally pay to the government, goes towards your pension instead.

Though they can seem complicated, the basic principles of pensions are quite simple, you’re essentially putting aside some money now so that you can use it later.

You get tax relief on the contributions and your savings grow largely tax-free.

The size of your pension pot when you retire will depend on:

• How long you save for
• How much is paid into your pension pot over the years
• How well your investments have performed
• What charges have been taken out of your pot by your pension provider.

To withdraw from your pension, you need to be at least 55 years old (rising to 57 from 2028).

You can manage your withdrawals as best suits your lifestyle, which may mean withdrawing a monthly income to replace your salary, taking a lump sum, or a mixture of the two.

You can take 25% of your pension tax-free but you will pay Income Tax when withdrawing the remaining 75%.

If you’re new to pensions, it’s worth reading our guide to choosing the right pension.

It’s important to remember that, as with all investing, your capital is at risk in a Personal Pension. Investments can fluctuate in value and you may get back less than you invest.

Please remember that tax rules can change at any time.