Designed to offer a lump sum and income in retirement, you don't even have to be in employment to take out a personal pension. There are several types, so to find out how they differ from one another and to get the answers to some of the most popular questions, read on.
What is a personal pension?
Usually, it’s a sum of money that you’ve saved by making contributions to a scheme offered by a private pension provider. They can be run by your employer or a personal pension provider. It’s important to review what’s in your pension regularly. That way, you can:
- understand what you’re likely to get in retirement;
- see if you’re on track to meet your retirement goals;
- take action if it looks as though that may not happen.
What’s the difference between a workplace pension and an occupational pension?
Essentially, workplace pensions and occupational pensions are names that describe the same thing – pension schemes that are run by your employer. Usually you and/or your employer will have contributed monthly amounts to the pension scheme – and as you change jobs, you may end up with more than one of these pensions.
How can I find out what my pensions are worth?
A pension provider should send you a statement, at least once a year. That will show how much you’ve saved and how much you’re likely to receive as a monthly income when you retire, but it’s an estimate - it’s not guaranteed.
I can’t find a pension statement, what can I do?
If it’s a private pension (one you’ve set up yourself), simply contact the pension provider directly. Their details will be on any letters you’ve received. If it’s a scheme that’s run by your employer, speak to someone at your company first.
These letter templates will help. Don’t forget to fill in as many details as you can before you print one off and post it:
- Download pension details request template – from a previous employer
- Download full pension statement and details request template – from a pension provider
And if I can’t find my pension provider?
Don’t worry. The Government runs a pension tracing service, which can help you track down pensions you’ve lost (or even forgotten about). It’s a free service, and you'll get the address of your scheme provider if the Pension Tracing Service can find a record of them.
How much can I save into a personal pension?
There is no limit on the amount you can save into a personal pension – but there are limits on the amount that you get tax relief on.
For starters, you will have an annual allowance which means you can pay up to £40,000 into your pension. However, there may be circumstances where your allowance will be restricted – such as being a high earner or if you have flexibly accessed any of your pensions. Any savings beyond your £40,000 annual allowance may be subject to taxation, so this is worth keeping in mind.