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Personal pensions

If you are saving in a pension through your workplace or privately, then nowadays you are most likely to be doing so via a personal pension1. There, that was easy…

Look behind the scenes, though, and you will find that the different types of personal pension work in very different ways, even if the basic principles remain the same:

Personal pensions

Personal pension principles

  • You contribute into the pension yourself, and subject to certain rules the government puts some money in as well ( tax relief )
  • The amount of money you get to enjoy from your pension in the future depends on how well your pension scheme performs, and how much you have been charged in the meantime 
  • You own this pension yourself, which means you have great flexibility on how much and when you choose to take your money in the future, including being able to gift it all to someone else when you die
  • The investment risk is yours and your pension may not grow by as much as you expect. It is even possible to get back less than you put in, as with any investment.

How personal pensions differ

So what are the differences between the different types of personal pension, then? These can range from the types of investments they allow, to fundamental differences in the way your pension’s growth is calculated. If you have a with-profits pension, for example, then your pension provider has discretion on how much growth they will add to your pension in a given year’. Most personal pensions are a bit more straightforward though.

Many company pensions are also personal pensions, as are all auto-enrolment pensions. In fact it is probably easier to tell you which pensions are not personal pensions; Final salary pensions and the state pension are not personal pensions, and that’s about it.

To find out more about the different types of personal pension, follow the links below. Of course if you already know which type you have, you can just jump straight to it.

Types of final personal pension

No matter what sort of personal pension you have, you are protected by a host of rules and regulations that are overseen by the Financial Conduct Authority (FCA), and this means that you have access to the Financial Ombudsman service. This protection is one of the many benefits of investing for your future in a personal pension.

Important Information, References and Links

Tax treatment depends on your individual circumstances and may be subject to change. The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date (14th November 2018), but could be out-of-date by the time you read the article.

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