Personal Pensions

Personal pensions were originally aimed at the self-employed and other workers without access to an occupational scheme. Now, however, lots of different types of investors use them as retirement saving vehicles.

What is a personal pension?

With a personal pension, you pay regular monthly amounts or a lump sum to a pension provider who invests the money on your behalf. The fund is usually run by a financial organisation such as a bank or insurance company.

If you are a confident investor, you can make your own decisions where to put your retirement savings by opening a Self-Invested Personal Pension (Sipp). Sipps can be opened with an independent financial advisor, stock broker or pension provider.

Is a personal pension right for me?

Whether or not a personal pension is right for you depends largely on how much you can afford to save for retirement and how much income you can expect from any other pensions.

If, however, your employer offers a company pension scheme or a stakeholder pension scheme into which it makes an employer contribution, you will usually be better off increasing your contributions to this fund.

Saving into a pension has tax advantages too. Your contributions are free from basic rate tax at 20% and higher rate tax payers can claim back the extra they pay on their tax return.