Qualification
Personal pensions are complicated things. There are different types and each has its pros and cons. And there are lots of rules about what you can and can’t do with a personal pension. For example, there are limits on how much you can pay in and withdraw each year. You also have choices as to what you ‘do’ with your pension when the time comes to retire. Some pensions provide death benefits, some don’t. This page summarises some of the main points—it is not a definitive guide. Your E & G advisor will and take you through the relevant details carefully and clearly.
Who looks after personal pensions?
Most personal pension schemes are managed by approved pension companies, many of which are insurance companies. These companies are sometimes known as ‘pension providers’.
Taking money from your pension
You can access the money in your pension pot from age 55, even if you’re still working. (The rules are different for people who are seriously ill.) You can make withdrawals—as and when you need to—directly from your pension pot. How much you can withdraw depends on the value of your pension pot at the time you make the withdrawal. On the other hand, if you need a fixed amount of income every year, you can exchange some or all of your pension pot for an annuity. An annuity provides a guaranteed amount of income for the whole of your life.
How a private pension works
A private pension is essentially, a long term savings plan. You can pay in to your plan each month, or if it suits you better, make a large one-off payment or pay in occasional lump sums. The money you pay in to your plan goes towards building up your pension ‘pot’. Your pension provider will invest your pot in shares, cash deposits and other types of securities with the aim of increasing its value over time.
How much money can you expect from your private pension?
Generally speaking, the more you pay in to your pension pot over the years, the bigger it will be. But that’s only part of the calculation: other factors include:
- The age at which you start your pension
- Your health
- How well your pension pot has been invested
Your advisor will be able to give you an estimate of what your pot will be worth on a year-by-year basis.