Personal pensions

It is important to understand that the State Pension and workplace pensions are not the only way to save for retirement. Personal pensions allow you to top up your retirement income beyond your workplace scheme or State Pension. They are also an option for those who are self-employed.

You can be flexible with the contributions and access your pension flexibly at retirement too. You may also have more investment choices within a personal pension.

If you are currently serving in the armed forces, or have previously served, you will normally build up benefits through the Armed Forces Pension Scheme. You can watch our video on the rmed Forces Pension Scheme to understand how that scheme works. However, some service personnel also choose to save into a personal pension to increase their retirement income, especially if they want more financial flexibility beyond their armed forces pension.

Personal pensions are separate from the Armed Forces Pension Scheme and are designed to help you build up extra retirement income over time. With a personal pension, you make contributions that are invested for long-term growth.

Personal pensions can also be useful if you are a reservist with civilian employment, if you have periods of self-employment, or if you leave service and no longer build up armed forces pension benefits. Spouses and partners may also use personal pensions as part of their own retirement planning, as they are not enrolled into the Armed Forces Pension Scheme.

There are a few different types of personal pension. With all of them, the earlier you start, and the more consistently you contribute, the greater the potential for compound growth.

With a standard personal pension, individual plans are arranged directly with a pension provider. You pay contributions, which are invested in one or more different investment schemes, called funds, to grow until retirement.

Stakeholder pensions must meet government-set standards around charges, contribution flexibility, and minimum payments. They typically cap administration fees at a modest level and allow you to stop and start contributions. They are designed to be accessible and relatively low cost.

Self-Invested Personal Pensions – SIPPs – provide a broader range of investment choices, often including direct shares and commercial property. They suit people who wish to manage their own investments or have an adviser do so. They offer greater control and potential for higher investment returns, but they may also carry higher risks, depending on the investments that you choose to hold, and sometimes have more complex fee structures.

Personal pensions give you more flexibility to save for retirement, whether you’re employed or self-employed. From low-cost stakeholder pensions to SIPPs with more control and choice, the key is to start early and contribute regularly. That way, you can take full advantage of growth over time and build the retirement that works for you.