Pensions: Personal pensions

It’s 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’re 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. There are a few 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’re 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 advisor to 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.

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