A personal pension is a type of pension plan in the UK that is designed to provide retirement income to individuals. Personal pensions are funded by contributions made by the individual or their employer, and the retirement income is typically based on the performance of the investments in the pension fund.
There are several types of personal pensions available in the UK, including defined contribution pension plans, self-invested personal pensions (SIPPs), and stakeholder pensions.
Defined contribution pension plans, also known as money purchase pension plans, provide a retirement income that is based on the contributions made to the pension fund and the performance of the investments in the fund.
SIPPs are similar to defined contribution pension plans, but they offer more control and flexibility over the investments within the pension fund. Stakeholder pensions are a type of defined contribution pension plan that are designed to be low-cost and flexible, with minimum contribution and contribution holiday requirements.
Personal pensions are a popular choice for people who are self-employed or who do not have access to an occupational pension plan through their employer. They offer a way for individuals to save for retirement and to take advantage of tax relief on their contributions.
However, it’s important to carefully consider the fees and charges associated with personal pension plans, as well as the investment risk and potential rewards, before deciding whether a personal pension is right for you.