Lifetime allowance

Value of payouts from pension schemes

The lifetime allowance is a limit on the value of payouts from your pension schemes – whether lump sums or retirement income – that can be made without triggering an extra tax charge.

State Pension

New rule changes

The State Pension changed on 6 April 2016. If you reached State Pension age on or after that date, you’ll get the new State Pension under the new rules.

Defined contribution pension schemes

Providing an income in retirement

With a defined contribution pension, you build up a pot of money that you can then use to provide an income in retirement. Unlike defined benefit schemes, which promise a specific income, the income you might get from a defined contribution scheme depends on factors including the amount you pay in, the fund’s investment performance and the choices you make at retirement.

Defined benefit pension schemes

Secure income for life

A defined benefit pension scheme is one where the amount paid to you is set using a formula based on by how many years you’ve worked for your employer and the salary you’ve earned rather than the value of your investments. If you work or have worked for a large employer or in the public sector, you may have a defined benefit pension.

Personal pensions

Saving tax-efficiently for retirement

A personal pension is a type of defined contribution pension. You choose the provider and make arrangements for your contributions to be paid. If you haven’t got a workplace pension, getting a personal pension could be a good way of saving for retirement.

Self-invested personal pensions

Providing greater flexibility with the investments you can choose

A self-invested personal pension (SIPP) is a pension ‘wrapper’ that holds investments until you retire and start to draw a retirement income. It is a type of personal pension and works in a similar way to a standard personal pension. The main difference is that with a SIPP, you have greater flexibility with the investments you can choose.

Using your pension pot

More choice and flexibility than ever before

Under the pension freedoms rules introduced in April 2015, once you reach the age of 55, you can now take your entire pension pot as cash in one go if you wish. However, if you do this, you could end up with a large tax Income Tax bill and run out of money in retirement. It’s essential to obtain professional advice before you make any major decisions about how to access your pension pot.

Taking your pension

Using different parts of one pension pot or using separate or combined pots

Under the new flexible pension freedoms rules, you can now mix and match various options, using different parts of one pension pot or using separate or combined pots.

Buying an annuity

A regular retirement income for the rest of your life

One way to use your pension pot is to buy an annuity. This gives you a regular retirement income, usually for the rest of your life. In most cases, this is a one-off, irreversible decision, so it’s crucial to choose the right type and get the best deal you can.

Pension booster

Setting goals for retirement

Those who set tangible goals for the future could be £30,000 better off in retirement, according to new research.