Personal Pensions Guide
According to the May 2015 Aegon UK Readiness Report, most people would like to retire with £42,000 to spend each year. The reality is that in retirement, most people’s pension funds leave them with only £11,400 a year to spend. Would that be enough for you to live on?
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
- Other people can also pay in on your behalf - i.e. partners or other family members can help you save for your retirement, or you can pay into one for someone else, for example your children's (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, the value of your plan could be paid as a cash lump sum to your beneficiaries
- Individual pension funds 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:
- Your pension savings can be used to give you a regular income
- You can take up to 25% as tax-free cash. You then have the choice of taking the rest of your cash as a lump sum too, but this is subject to marginal tax rates. You can find out more about your options at Your Retirement Planner
Remember that the value of an investment and any income from it can fall as well as rise and isn't guaranteed. You may get back less than the amount originally invested. This information is based on our understanding of current legislation, taxation law and practice, which may change. The amount of tax relief you’ll receive depends on your individual circumstances.
Read our workplace pensions guide.
Learn about ISAs – another way to save.