Personal pensions are designed for those who do not have access to a company pension. Unlike a company pension there is no final salary version so the final value of your pension will depend on your contributions, the charges levied by the fund managers and the performance of the fund in which the money is invested.
Contributions to a personal pension get tax relief. That means the Inland Revenue will effectively top up any contributions you make with a payment of its own. If you are a basic rate taxpayer, it will effectively cost you just £80 to see £100 paid into a pension. For a higher rate taxpayer it effectively costs just £60 to see £100 go into a fund.
You can invest up to 100% of earnings into a personal pension. The contributions you make can be varied each year to suit your financial circumstances.
A personal pension is not tied to any job or employer - you can keep it wherever you go in the country and whatever you do.
If you wish to get an idea of what you need to contribute to a pension please go to the FSA Pension Calculator.
*Levels, bases of reliefs from taxation may be subject to change
What the FSA Say
The FSA says: “Your retirement can last 20 or 30 years – maybe longer, so you need to be prepared – you may be living on your retirement income a long time. Try to think about how much income you’ll need. Work out how much you’ll want to spend (using today’s price levels). If you decide to use a pension to save for your retirement, it may be a good idea to start one as soon as possible. If you put it off by just a few years, you could end up with a much smaller pension.
- Find out if your employer offers a pension scheme and whether they contribute to it.
- You cannot take your money out of a pension until you are at least 50 (this is going up to 55 by 2010).
- Many schemes give you a statement each year with details of your possible income at retirement.”
Member of the Association of Member-Directed Pension Schemes
Authorised and regulated by the Financial Services Authority
(SIB No: 133515)