Personal Pensions Guide
According to the May 2017 Aegon UK Readiness Report, most people would like to retire with £32,270 to spend each year.
When asked the same question a year ago people were reaching for £37,912 on average, which would undoubtedly leave the majority disappointed.
The current figure is still some way above the average UK income of £28,200, but it’s a positive sign that aspirations are moving in a realistic direction.
Here’s a brief guide to one of the best ways to save and try to achieve your retirement goals – personal pensions.
Saving with a personal pension
- A personal pension is up to you (and possibly a financial adviser) to set up
- The government could top up your payments with tax relief - so it’s an efficient way to save. The value of any tax relief depends on your individual circumstances / the individual circumstances of the investor.
- Other people can also pay in on your behalf - i.e. partners or other family members can help you save for your retirement. You can also pay into someone else's pension. For example, you can pay into your child's pension pot (age restrictions may apply).
- You can change the amount you pay in and pay lump sums if you want.
- If you die before you retire, your pension may be paid to your beneficiaries, either as a lump sum, an annuity, or through flexi-access drawdown.
- Individual personal pensions aren’t suitable for everyone. For example, if you have access to a workplace scheme you may be better paying into that.
What happens at retirement
When you retire, depending on your type of pension, you can take up to 25% of the money built up in your pension as a tax-free lump sum.
The options you have for taking the rest of your pension pot include:
- Taking all or some of it as cash
- Buying a product that gives give you a guaranteed income (known as an ‘annuity’) for life
- Investing it to get a regular, adjustable income (sometimes known as ‘flexi-access drawdown’
This information is based on our understanding of current, taxation law and HMRC practice, which may change.
Read our workplace pensions guide.
Learn about ISAs – another way to save.