Personal pensions

How to get a pension outside the workplace

1. If you have the cash to save, the arguments in favour of pensions are compelling: you get tax relief on your contributions meaning that it costs you only £80 to put £100 in your pension. Higher rate taxpayers can pay even less for that £100.

2. You don’t have to be employed to contribute to a pension. If you’re self-employed or non-working you can set up a personal pension by yourself.

3. You can set up pensions for others such as non-working partners or your child(ren). You’ll get tax relief on contributions of up to £2,880 (which makes £3,600 gross in your pension pot) a year.

4. Even if you’ve a pension through work, you can also have a personal pension. Bear in mind there are (high) limits on the amount you can contribute. See the Pensions Advisory Service for more help.

5. Personal pensions are usually offered by insurance companies. Watch out for the charges – and also performance of the underlying funds the pension is in. Those tagged ‘stakeholder’ pensions come with capped charges.

6. Your contributions build up into a pension pot which you can take when you reach 55. You can keep saving, splash the cash on a car or holiday (not recommended) or use the money to provide you with an income in retirement. See our guide to cashing in pensions here.

7. If you don’t want a traditional personal pension, consider a self-invested personal pension (Sipp) which allows you to choose where your pension money is invested.

8. Sipps are offered by advisers, fund managers and others. There’s a table at MoneySavingExpert which shows the current best deals.

9. If you don’t fancy tying up your money in a pension, you can still save for retirement with an Individual Savings Account (Isa). The tax relief is not so tempting but you can release the money before you are 55. Also, the income they pay out is not taxable whereas you could pay tax on your pension income.

10. Remember if you put money in a pension you can’t get at it until you retire. Keep some cash available for an emergency.


More stuff:

  • Get the low-down on pensions with Citizens Advice here
  • Find out about cheap personal pensions here
  • Chapter and verse from the government is posted here.


Last updated 22 September 2018.