Saving for a pension offers wide-ranging opportunities at all stages in your working life. New freedoms and flexibility about how you can access your pension savings once you have reached the minimum retirement age has brought new possibilities to the table, making pensions an attractive and tax-efficient element in any financial plan.

Contributions to a pension scheme are eligible for tax relief, up to the Annual Allowance. What this means is that for every £8 you put into your pension, the Government will add another £2 in tax relief, if you are a basic rate taxpayer. The Annual Allowance for the 2017-18 tax year is £40,000 for most taxpayers although those with adjusted incomes over £150,000 will have a lower allowance. The allowance will also be reduced if you have started to take pension benefits from your fund.

There are 3 basic types of pension scheme you can adopt to hold your pension savings:

  • Personal Pensions: a pension savings solution that provides you with a pension pot into which you can put contributions. Your employer can contribute too, if desired. Tax relief is normally added to your contributions. Anyone can save in a personal pension (even those who are not earning). It is possible to transfer your pension savings from one Personal Pension fund to another but it’s important to get advice before doing so.

o Stakeholder Pensions are a form of personal pension facility available to anyone. There is a cap on charges for a stakeholder scheme but investment choices may be limited.

  • Workplace Pensions: with workplace schemes now compulsory, every employer will have a scheme to which you can belong. See our Workplace Pensions page for more details.
  • Self Invested Personal Pension (SIPP): a more sophisticated personal pension scheme for those with the knowledge and experience to be hands-on with the investments in their pension fund. SIPPs can incorporate a wider range of investment assets, including commercial property, direct shareholdings and discretionary-managed portfolios.

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested. The tax treatment of investments depends on individual circumstances and is subject to change.

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