In this guide we’ll start by looking at how personal pensions work in the UK, along with some information on your options when it comes to choosing and buying a personal pension. We’ll explore the rules around personal pensions as well as your rights. We’ll also indicate how you can get professional advice in finding the best personal pension for your needs.
First, let’s get into the basics of personal pension plans, including:” st_subtitle_decoration=”” st_separator_enable=”separator_on” st_separator_position=”below_title” st_separator_style=”solid-line” st_separator_width=”sep-border-width-1″ st_text_align=”text-left” st_width=”st_fullwidth”][/vc_column][/vc_row][vc_row][vc_column width=”1/2″][vc_column_text]
- What is a personal pension?
- Do I need a personal pension policy?
- How do personal pension plans work in the UK?
- Types of personal pension
- Your rights: Is my personal pension protected?
- How to get a personal pension
- Eligibility criteria
- Choosing a personal pension
- Where to get personal pensions advice
- Speak to an expert on personal pension products
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.[/vc_column_text][/vc_column][/vc_row][vc_row el_id=”how-they”][vc_column][vc_empty_space][tek_sectiontitle st_title=”How do personal pensions work in the UK?” st_title_tag=”h2″ st_subtitle_decoration=”subtitle-text-underline” st_separator_enable=”separator_on” st_separator_position=”below_title” st_separator_style=”solid-line” st_separator_width=”sep-border-width-1″ st_text_align=”text-left” st_width=”st_fullwidth”][vc_column_text]All UK personal pensions are classed as ‘defined contribution’ schemes (also known as ‘money purchase’ schemes), which means the amount you’ll have available in your pension pot at retirement depends on how much you’ve contributed personally, as well as the performance of the assets your money is invested in.
UK personal pension plans can be taken alongside the State Pension, but the amount you take from your personal pension in the form of a lump sum or regular withdrawals in a given year may affect the amount of state pension and other benefits you’re entitled to.
Types of personal pension
There are two main types of personal pension plan (PPP):
- Stakeholder pensions
- Self-invested Personal Pensions (SIPPs)
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 in the UK?
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 pension 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.
What is your personal pension pot?
Your ‘personal pension pot’ is simply a term used to refer to the sum total of pension contributions you’ve made over your lifetime, from all sources.
This could include contributions from employers if you have any existing or previous workplace pensions, in addition to the money you’ve personally provided – and it can include funds from multiple pension schemes.[/vc_column_text][/vc_column][/vc_row][vc_row full_width=”stretch_row” css=”.vc_custom_1567762653127{background-image: url(https://ml0rrzn3serq.i.optimole.com/warmKW8-TIXyQNKx/w:auto/h:auto/q:auto/https://www.onlinemoneyadvisor.com.au/wp-content/uploads/2019/09/circle-background.png?id=7289) !important;}”][vc_column][tek_calltoaction cta_icon_type=”no_icon” cta_title=”We can arrange a free pension review for you today” cta_subtitle=”70% of customers who have a pension review find a better deal” cta_text_color=”#000000″ cta_button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Ffree-pension-review%2F|||” cta_button_text=”Get started” cta_button_style=”tt_secondary_button” cta_button_color_scheme=”btn_secondary_color”][/vc_column][/vc_row][vc_row el_id=”how-to”][vc_column][vc_empty_space][tek_sectiontitle st_title=”How do I join a personal pension scheme?” st_title_tag=”h2″ st_subtitle_decoration=”subtitle-text-underline” st_separator_enable=”separator_on” st_separator_position=”below_title” st_separator_style=”solid-line” st_separator_width=”sep-border-width-1″ st_text_align=”text-left” st_width=”st_fullwidth”][vc_column_text]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.[/vc_column_text][/vc_column][/vc_row][vc_row el_id=”choosing”][vc_column][vc_empty_space][tek_sectiontitle st_title=”How to choose a personal pension plan” st_title_tag=”h2″ st_subtitle_decoration=”subtitle-text-underline” st_separator_enable=”separator_on” st_separator_position=”below_title” st_separator_style=”solid-line” st_separator_width=”sep-border-width-1″ st_text_align=”text-left” st_width=”st_fullwidth”][vc_column_text]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?
The experts we work with can provide you with an initial pension review for free. 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 is our guide to pension reviews or make an enquiry to book one in today.
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.[/vc_column_text][/vc_column][/vc_row][vc_row el_id=”expert”][vc_column][vc_empty_space][tek_sectiontitle st_title=”Get personal pensions advice from an expert” st_title_tag=”h2″ st_subtitle_decoration=”subtitle-text-underline” st_separator_enable=”separator_on” st_separator_position=”below_title” st_separator_style=”solid-line” st_separator_width=”sep-border-width-1″ st_text_align=”text-left” st_width=”st_fullwidth”][vc_column_text]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.[/vc_column_text][vc_empty_space height=”50px”][/vc_column][/vc_row][vc_row full_width=”stretch_row” css=”.vc_custom_1568199168451{background-image: url(https://ml0rrzn3serq.i.optimole.com/warmKW8-TIXyQNKx/w:auto/h:auto/q:auto/https://www.onlinemoneyadvisor.com.au/wp-content/uploads/2019/09/circle-background.png?id=7289) !important;}”][vc_column][vc_empty_space height=”30px”][tek_sectiontitle st_title=”Speak to an advisor” st_title_tag=”” st_subtitle=”Call us on 0808 189 0463 or fill out our quick enquiry form to be matched with the perfect advisor for you.” st_subtitle_decoration=”” st_separator_enable=”separator_off” st_text_align=”text-left” st_width=”st_fullwidth”][vc_empty_space height=”10px”][tek_button button_text=”Find me an expert” button_style=”tt_secondary_button” button_color_scheme=”btn_secondary_color” button_link=”url:https%3A%2F%2Fwww.onlinemoneyadvisor.com.au%2Fcontact-us%2F|||” button_position=”pull-left”][vc_empty_space height=”30px”][/vc_column][/vc_row][vc_row full_width=”stretch_row”][vc_column][vc_empty_space height=”50px”][tek_sectiontitle st_title=”Read more about personal pensions below” st_title_tag=”” st_subtitle_decoration=”” st_separator_enable=”separator_off” st_text_align=”text-center” st_width=”st_fullwidth”][vc_empty_space][vc_wp_custommenu nav_menu=”8920″ el_id=”column-count”][/vc_column][/vc_row]