Personal Pensions Made Easy

A guide to UK personal pensions: what they are, how they work and where to get personal pension advice.
Find me a pensions expert

A personal pension is a retirement savings product that you set up yourself to provide you with income when you stop working. These DIY plans are becoming increasingly popular, but which type of personal pension should you choose and how do you find the right deal?

In our comprehensive guide to personal pensions, we answer these questions and more…

In a hurry? We work with experts who are always ready to answer your questions. Call 0808 189 0463 or make a quick enquiry and we’ll match you with an expert.

What is a personal pension plan?

A personal pension is a type of pension plan that you arrange and pay into yourself. They are usually defined contribution schemes, so the amount of income you receive in retirement will depend on how much you contributed over the years and how the underlying investments performed.

You can choose from: a personal pension, a stakeholder pension and a self-invested personal pension (SIPP).

Do I need a personal pension?

This will depend on your own expectations of income in retirement, and on what, if any, other sources of income you are likely to be able to claim.

For example: do you already have a workplace pension(s) in place, and if so, what is its value and could you continue paying into it after moving jobs? How much are you set to receive from the state pension, and will this be enough to cover your lifestyle and outgoings? What other income sources can you rely on?

If you don’t feel that your future income is adequately served by your current pension pot, it’s likely that opening a personal pension account will benefit you, even if you don’t have a lot of spare money to pay into it at the moment. As long as you have enough to meet the minimum requirements, most experts would recommend starting one as soon as you can afford to do so.

Types of personal pension

There are three types of personal pension plan (PPP):

  • Personal pensions
  • Stakeholder pensions
  • Self-invested Personal Pensions (SIPPs)

Personal pensions are defined contribution pension plans. In terms of complexity they sit right in the middle of stakeholder pensions and SIPPs.

If you opt for a personal pension you will:

  • Be able to decide where your pension money is invested; choose from a range of funds which offer a wide choice a investment strategies
  • Invest with the long-term in mind; investing in shares through a pension fund over the longer term is usually a decision which can pay off more than lower-risk investments, such as holding cash or buying bonds
  • Have the option to diversify; you can spread your risk by spreading your money between a few different funds and benefit from a variety of investment strategies
  • Need to check the fees and charges; these can vary greatly between funds and providers, make sure you check that they are fair and competitive

If you’re interested in setting up a personal pension to make sure you can afford a comfortable retirement when the time comes, get in touch for a free, no-obligation chat.

We’ll match you with one of the pension experts we work with. They will be happy to discuss your pension investment options with you and help you decide the best pension strategy for you, taking all your circumstances into account.

Stakeholder pensions are a flexible and relatively low-maintenance type of pension that you can take out as an individual and they’re sometimes also offered by employers, too. The government has set out certain standards that stakeholder pension schemes must meet, which include:

  • Allowing low minimum contributions
  • Offering charge-free transactions
  • Limited charges
  • Permitting flexible contributions
  • Offering a ‘default investment fund’

A key benefit of stakeholder pensions is that they require little input or decision-making from the customer, so they’re often taken by those who don’t want to have to worry about taking risks or committing to a lot of admin.

A potential downside is that they don’t offer much control or choice in terms of the investment portfolio – a SIPP does not have these drawbacks.

Self-invested personal pensions or SIPPS are a more ‘hands-on’ class of personal pension that give customers a higher degree of choice of the types of asset to invest their pension savings in.

SIPPs allow you to build your own DIY portfolio of assets – including unit trusts, stocks and shares, gilts and bonds, commercial property and more. But the cost of this additional freedom is the amount of time and effort you’ll need to put into managing your funds.

If you’re still unsure of which is the best personal pension arrangement for you and feel you’d benefit from professional advice, the specialists we work with are ideally placed to help you find the right solution. Don’t hesitate to make an enquiry today and we’ll be happy to talk through your requirements free of charge.

Are personal pension funds protected?

Your pension may well be the biggest investment you make in your life besides any property you own, so it’s important to know what legal protections are in place to safeguard personal pensions in the UK.

The good news is that personal pensions are protected by the Financial Services Compensation Scheme (FSCS), which will pay out to affected customers in the event of a provider going bust or otherwise being unable to honour its commitments.

The amount of compensation offered will be up to 100% of the original pension’s value in the right circumstances, and provided that the pension qualifies as a legitimate UK scheme: check yours registered with the Financial Conduct Authority (FCA) for most pensions or the Pensions Regulator if it’s a stakeholder pension.

In some cases, SIPP holders can also claim compensation for investment failures up to £85,000, and claims up to the same amount are considered if you believe that you’ve been given bad advice by a regulated advisor.

How can I protect my payments?

For extra peace of mind you could take out a personal pension protection plan, which is a form of insurance intended for those who are still making contributions to their pension.

This is usually an optional feature in certain income protection policies, and it’s designed to ensure you can afford to keep paying into your pension for an agreed period if you’re unable to work. Please feel free to make an enquiry if you’d like to discuss this type of cover with an insurance specialist.

We can arrange a free pension review for you today

70% of customers who have a pension review find a better deal

How do I join a personal pension scheme?

If you’ve not yet started a pension of any kind, or if you’ve only ever been enrolled in one through work, it can be hard to know where to start looking for the right personal pension.

This section should give you an idea of how to get started, what to look out for and where to get personal pension help from an expert.

Eligibility criteria

There are few rules on who can apply for a personal pension: as long as you’re resident in the UK you’re unlikely to struggle to be accepted on one. There may be financial obstacles to joining certain schemes, as some have joining and membership fees that may be prohibitive. But the majority do not, and stakeholder pensions in particular tend to be very flexible.

You can take out a personal pension regardless of your employment status, so it won’t matter if you’re self-employed, engaged in any type of employment or even if you’re not currently working at all. And if you are in work, there’s nothing to stop you taking out a personal pension in addition to any workplace pensions provided by your employer.

How to choose a personal pension plan

If you’re looking to buy a personal pension plan soon, you’ll no doubt be aware that there’s a huge range of providers and products to choose from, and the sheer amount of choice can be daunting.

To get started you might want to draw up a checklist of questions for each scheme you may consider, including:

  • Is there a minimum contribution amount, and if so, can you afford it?
  • What is the fee structure?
  • Can you apply for this provider’s personal pension online?
  • What charges will you need to pay, e.g for changing or stopping your contributions?
  • What level of risk is involved?
  • Do you need to pay a lump sum to join, and if so, how much?
  • For stakeholder pensions: where will your money be invested?
  • For SIPPs: what assets can you invest in, e.g. stocks & shares, commercial property?

A basic but very important point to remember is that any pension product you take out will need to be registered with the FCA or the Pensions Regulator (if a stakeholder pension) to ensure your money is protected in the event of provider or investment failure.

You could also get a feel for what’s available by looking at personal pension reviews and personal pension fund performance tables, as well as by talking to friends and family about their experiences and seeking recommendations from colleagues. But don’t forget that an independent pensions advisor will have a more comprehensive overview of the market, and should be able to give impartial advice.

How do I get a personal pension review?

Simply make an enquiry with us. The experts we work with can provide you with a free, no-obligation pension review as part of their service.

It’s important to get one as this will help you determine how your investments are performing and whether setting up a personal pension is the best course of action for your financial future.

You can read more about this service in our guide to pension reviews.

Do I need an independent financial advisor for my personal pension?

If you’re setting up a personal pension or already have one, speaking to a specialist pensions advisor is always recommended.

If you’re entering a new scheme, talking to an independent expert who has access to the entire market is the best way to ensure that you end up with the best deal. Moreover, an advisor can provide you with bespoke guidance and help you with any paperwork.

Those who are already paying into a personal pension could also benefit from a consultation with a pension advisor. They can carry out a free pension review to make sure your retirement savings are invested in the right place. Around 70% of people who undergo a pension review end up discovering that their funds would be better off elsewhere.

Do I need a financial advisor to transfer my pension?

If the pension pot you’re transferring is worth more than £30,000 or you’re moving funds from a defined benefit scheme, then yes, this is a legal requirement.

However, even in cases where professional advice is not mandatory, speaking to an expert is always recommended if you’re transferring your pension, as an independent advisor can help you ensure you’re moving it to the right place and fully understand the implications.

Do I need an advisor to withdraw my pension?

You can cash in your pension from age 55. Seeking expert advice beforehand is only a legal requirement if the pot is worth over £30,000 or you’re exiting a defined benefit scheme.

That said, specialist advice is recommended as you will want to be certain that cashing in is the right decision. It’s also important to be fully aware of tax liabilities that come with cashing in a pension, and an expert advisor can clear up any uncertainty.

Do I need an advisor to draw down my pension?

There is no legal obligation to take financial advice before taking pension drawdown, assuming you’re in a money purchase or defined contribution scheme.

However, it’s important to be aware of the risks that pension drawdown comes, such as running out of pension funds early and missing out on the guaranteed income an annuity can bring. A financial advisor can assess these risks for you and help you decide whether the potential rewards on offer mean they’re worth taking.

What fees will a financial advisor charge for pensions advice?

An initial consultation with one of the pensions advisors we work with won’t cost you a penny. They will even throw in a free pension review with no obligation to proceed.

Beyond that, financial advisor fees for pensions advice can vary depending on how the expert in question charges and the exact service they are carrying out for you.

Most pensions advisors charge in one of the following ways…

  • Fixed fee: This will be an amount agreed up front, based on the service they are carrying out.
  • Hourly rate: The average in the UK is around £150 per hour, though it can vary considerably. Some advisors may even charge a monthly rate if their services are needed over a long period of time.
  • Percentage of the assets: Some financial advisors will charge a fee based on a percentage of the asset in question when their services are needed over a long period of time.

All of the independent financial advisors we work with are carefully vetted and we will only introduce you to one if they are best positioned to save you time and money in the long run. Make an enquiry and we’ll match you with the right pensions expert today.

Get advice from an expert

If you’re looking for expert personal pension advice in the UK, please don’t hesitate to call us on 0808 189 0463 or make an enquiry today and we’ll be in touch soon to discuss your requirements.

We can then refer you to one of the highly-rated, specialist pensions advisors we work with: all of them have access to the entire market and can give independent, bespoke advice on your personal pension options, and on finding the best possible plan for your retirement goals.

Speak to an advisor

Call us on 0808 189 0463 or fill out our quick enquiry form to be matched with the perfect advisor for you.
Find me an expert