Personal Pension

Personal Pension Plans are provided by various institutions such as banks, building societies, insurance companies and unit trusts. They invest on your behalf a lump sum or a regular amount paid by you every month.

The final value of your pension fund will depend on how much you have contributed and how well the fund’s investments have performed. Set up and running charges are made to your fund by the companies that run the personal pension.

Tax relief is provided by the government on your contributions to boost the value of your pension. When retiring you can usually take up to 20 per cent of your fund as a tax-free lump sum. An annuity (a regular income payable for life) is bought from a life insurance company, with what has been built up from the rest of the fund. Alternatively you can take an income from the remainder of your fund while it continues to be invested called ‘income withdrawal’.

Contributions vary drastically depending on the level of retirement benefits required. The lower the contributions the lower the retirement benefits, so you need to make sure from the start of contributing that you have some idea of the level of benefits you aiming for at retirement. Personal Pension providers will give you projected estimates of benefits and the level of annual growth in order to achieve these benefits.