Personal Pensions represent a popular and attractive way of saving for your retirement. These pensions are also Money Purchase schemes and are open to everyone and especially useful if you are self-employed, your employer doesn't yet run a company scheme or just for topping up existing arrangements. From October 2012, the Government introduced reforms and all employers have to offer their employees, who meet certain criteria, automatic enrolment into a workplace pension. Employers can use the Government backed scheme, National Employment Savings Trust (NEST), or offer an alternative ‘Qualifying’ work place pension scheme such as a Group Personal Pension, providing it ‘ticks’ certain boxes. The process is being phased in between 2012 and 2018 depending on the head count of a firm. Employers are required to contribute a minimum of 3% of salary with Employees making a personal contribution of 4% with tax relief of 1% added on top, which again, is being phased in gradually.
All monies invested into your fund grow free of capital gains tax, and the contributions you make are enhanced by income tax relief at source. For example if you invest £80, the government adds on tax relief (currently 20%) to enhance your contribution to £100! If you are a higher rate taxpayer you can claim additional relief through your PAYE coding. An annual allowance of up to £40,000 (2016/2017) is available as well as the possibility of utilising potential carry forward of unused annual allowances.
A personal pension is an arrangement made in your name over which you have personal control. You can alter your contributions, suspend them, or stop them completely.
Under current legislation, you will be eligible to take 25% of your accumulated fund tax-free when you retire, the earliest age being from 55. There are a range of options when you decide to take benefits such as purchasing an annuity or via a pension decumulation product.
Personal Pensions usually offer a range of investment mediums to suit your attitude to investment risk, and you can change your investment at any time.