What are individual pensions?
Individual pensions are pensions that you keep, regardless of whether you move from one company to another. They can also be set up alongside a workplace pension, or even when you're receiving the State Pension. If you're self-employed or not working, you can also use an individual pension to help save towards your retirement.
All individual pensions benefit from tax relief.
All individual pensions benefit from tax relief, within specific limits, meaning that more of what you earn will go towards your retirement savings.
The final amount of money you get out of any type of individual pension is based on what you put in and how the fund performs over time. As the value of any investment can go down as well as up, so you might get back less than you put in.
There are three main types of individual pensions:
A personal pension is your own private pension that you can take from job to job. It's ideal if you don't have access to a workplace scheme or are self-employed. Essentially, you pay money into your plan and choose where to invest it from a range of funds that can be managed on your behalf.
You could also have a group personal pension with your employer. They will choose which provider runs your scheme, but your pension will be an individual contract between you and the provider.
Stakeholder pensions are similar to personal pensions in that you pay money in and invest in a range of funds. They're lower cost and can be used if you can only make smaller amounts of payments to help fund your retirement.
Self-invested personal pensions (SIPPs)
This is a specialist type of pension that gives you more choice over where your money is invested. So, if you're comfortable with taking a higher degree of risk, you can make your own investment decisions with a SIPP. You should seek advice if you're interested in this type of pension.
Speak to your employer to get more information on the workplace pension scheme.
Each type of individual pension has it's own benefits and considerations and so, if you're unsure if an individual pension will be right for you, please speak to a financial adviser.