What is a private pension?

Find out how to save up additional money for your retirement with a personal pension.

A private pension is a pension that you set up on your own and is separate from your workplace and your state pension. You can set up a private pension as well as a workplace pension and a state pension to give you a little more when it comes to your retirement.

It’s up to you whether you want to manage your pension yourself or have someone else manage it for you.

Other than getting yourself a bit more money in your retirement, there are some nice additional benefits to setting up a private pension, the main one being the tax breaks. If you’re a basic rate taxpayer, you get 20% tax relief on the money paid into your pension.

Withdrawing from a private pension

You can start withdrawing money from your pension from the age of 55. You get 25% of your pension pot tax free, anything more is subject to regular income tax. There are loads of ways to cash out on your pension when the time comes, such as by purchasing an annuity.

Why would I take out a personal pension?

There are several different reasons why you might choose to take out a personal pension:

  • You’re self-employed. When you’re self-employed, you don’t get access to a company pension, so you’ll need to save for retirement yourself.
  • You’ve taken time off work.
  • You don’t think the state pension is enough to get by on. State pension is currently just over £9,100 per year. If you think you’ll need more than this, then you’ll need an additional pension to top up your income.
  • You want to get the tax benefits. You get a nice little top-up from the government when you pay into your pension.

What’s the difference between personal pensions and self invested personal pensions (SIPPs)?

SIPPs are just a type of personal pension. They offer a wider range of investment options than personal pensions do.

With a SIPP, you can select funds that you want to invest in and invest in specific areas. You can also choose the assets that you want to invest in, such as trusts, government securities, commercial properties and stocks and shares, among many others.

SIPPsPersonal pensions
Who’s it suited to?Suitable for you if you’re more experienced in investing and know how to make investment decisions.Suitable for those with less experience in investing.
Investment choiceChoose your own investments – you can choose from a much larger range of investments than you can with a personal pension.Choose a fund or selection of funds that broadly match the investment strategy you are looking for. Some personal pensions give you more freedom to choose, which blurs the lines a little.
Who manages it?You manage your investments yourself or hire an investment manager to do it for you.The specifics of your investments are managed by the fund’s investment experts.
How much does it cost?Typically higher charges than standard personal pensions.Different funds typically charge different amounts, but this tends to be less than for SIPPs.
Find out moreBest SIPPsBest personal pensions

How do I compare pension providers?

There are a few things you’ll need to consider when choosing a provider for your pension. Here are some of the things to think about:

  • Do I need a SIPP? If you think you’ll want a broader range of investment opportunities, then you may want to choose a SIPP. We compare these pension types above.
  • Fees and charges. Compare how much each provider will cost you based on how much you are investing.
  • Exit fees. You only need to consider this if you think you might want to transfer out at any point.
  • Mobile app. It’s not essential for the provider to have a mobile app, but it’s nice to be able to check in from time to time.
  • Portfolios available. Providers will have different amounts of portfolios available. It’s nice to have some choice, so typically, the more, the better.

Compare pension providers

Name Product Minimum investment Choose from Fee for a £50,000 pension pot Brand description
Interactive Investor Pension
Any lump sum or £25 a month
Over 3,000 funds
Annual fee: £239.88, fund fees: £50-500
interactive investor is a flat-fee platform, which makes it cost effective for larger portfolios. Capital at risk.
Moneyfarm Pension
£1,500 (initial investment)
7 funds
Moneyfarm has pensions that are matched against your risk appetite, goals and planned retirement date. Capital at risk.
AJ Bell Pension
Over 2,000 funds
Annual fee: £125, includes fund fees
AJ Bell has two different pension options, a self managed pension and one that is managed for you. Capital at risk.
PensionBee Pension
Finder Award
PensionBee Pension
No minimum
9 funds
Annual fee: £250-475, includes fund fees
Pension Bee is a newbie in the pension market. It helps consolidate your pension plans into one place. Capital at risk.
Hargreaves Lansdown Pension
£100 or £25 a month
2,500 funds
Annual fee: £225 (£200 cap if holding shares), fund fees included
Hargreaves Lansdown is the UK's biggest wealth manager. It's got three different retirement options. Capital at risk.
Saxo Markets Pension
Saxo Markets Pension
Over 11,000 funds
No annual fee
Saxo Markets gives flexibility and control over your investment strategy. Capital at risk.
No minimum
4 portfolios
Annual fee: £375-455, fund fees included
Moneybox Pension
Finder Award
Moneybox Pension
3 funds
Annual fee: £225, fund fee: £60
Manage your money with an easy-to-use Moneybox app. Capital at risk.

Compare up to 4 providers

All investing should be regarded as longer term. The value of your investments can go up and down, and you may get back less than you invest. Past performance is no guarantee of future results. If you’re not sure which investments are right for you, please seek out a financial adviser. Capital at risk.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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