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What is a personal pension?

With a personal pension you pay regular monthly amounts or a lump sum to the pension provider who will invest it on your behalf. The fund is usually run by financial organisations such as building societies, banks, insurance companies or unit trusts.

Would a personal pension be good for you?

Your decision will largely depend on how much you can afford to save for your pension and how much you will get from other pensions.

Personal pensions may be suitable for:

• people who are self-employed
• people who are not working but can afford to pay for a pension
• employees whose employer does not offer a company pension scheme
• employees who have the option to pay into a company pension, but choose not to
• employees on a moderate income who wish to top up the money they would get from a company pension

A personal pension may not be the best choice if:

• your employer offers a company pension scheme
• your employer offers access to a stakeholder pension scheme, with an employer contribution
  

Paying your personal pension

Other people can pay into a personal pension on your behalf. This means that partners or other family members can help you save for your retirement.

If you have moderate earnings and think you'll need to stop and start payments or vary the amount, you might consider a stakeholder pension. A stakeholder pension is a flexible type of personal pension.

• Stakeholder pensions - more information

Other factors to consider before getting a personal pension

Remember that choosing a personal pension scheme is an important financial decision and there are many things to consider:

• what are the rules on making contributions?
• how much can you save and is the pension scheme ‘contracted out’ of the additional State Pension?
• how will the money be invested?
• how much does the pension provider charge you for setting up your pension and for administration?
  

How much pension you can get

You will receive a yearly forecast from your pension service provider. This will tell you how much:

• your fund is worth
• you can expect to receive if you continue to contribute at your current level

The final value of your pension fund will depend mainly on how much has been paid in and how well the fund's investments have performed. The companies that run these pensions charge you for starting up and running your pension. Charges are normally deducted from your fund.

Any questions about your personal pension should be directed towards your pension service provider.

When can you take your personal pension?

From April 2010 the earliest age you can take your personal pension is 55.

Most people choose to wait until they are 60 or 65, but you do not have to retire from work to get your pension benefits. You can also put off taking your pension until you are 75.

There are certain circumstances that will allow you to take your pension before you are 55. Your pension scheme provider will be able to tell you what your scheme allows.

Getting financial advice about personal pensions

If you're unsure that a personal pension is right for you contact the Pensions Advisory Service or a financial adviser before making a decision. A financial or pensions adviser will also help you decide which particular personal pension is suitable for you.

• The Pensions Advisory Service (TPAS)

• Pensions and financial advisers: who to contact

Tax and your personal pension

Find out more about the tax advantages of pensions.

• Tax relief on pension contributions

More useful links

Find out more about personal pension plans and planning for retirement.

• Personal pension plans through your employer

• Understanding company pensions

• Pension Tracing Service - trace a personal or company pension scheme

Useful contacts

• Money, tax and benefits contacts