The UK Rules
'Follow the Regulations'

UK Pension Rules

What is a Pension Plan? Workplace and personal pensions are tax-efficient, long term ways of saving money for your retirement.

How Pensions Work

Occupational and private pension schemes help to secure a regular income with financial benefits for people in older life.

Individuals, or their employers, can put aside long term investment contributions throughout their working lives.

The aim is for the maturing fund - pension pot - to make a profit. In most cases the fund yields regular payments for pensioners during old age retirement.

Pension funds often grow best when a percentage of your earnings is automatically invested. In most cases the money goes into stocks and shares. As the fund grows it should provide you with regular payments during your old age retirement.

The pot payments are usually deducted from your salary on paydays. As a rule your employer contributes extra money into the same fund. That means your pension scheme also benefits from governmental tax relief. There are different pension rules for self-employed workers.

When you are eligible to receive your pension, the fund pays you a regular income while you are alive. The scheme allows you to take a tax-free lump sum from your workplace pension when you retire.

In some circumstances you can take it all in one payment. This is more common if your savings are minimal. But, single lump sums are liable to income tax after the first 25%.

What are the Risks?

Investments carry degrees of risk. The value of stocks and shares fluctuates up and down. But, higher returns often result from investments in areas with higher risk.

Most financial advisers consider bonds to be less risky. There is more guarantee against losing your money. That means there is less risk to the value of your pension pot. But, a bad financial decision could affect the value of your final pension savings.

Private Pension TypesPrivate Pensions Rules

TYPES OF PRIVATE PENSIONS: The two different types of workplace pensions are called 'defined contribution pension schemes' and 'defined benefit pension schemes'. These are the two main kinds of workplace plans and as a rule your employer will offer you an option to join one of these occupational superannuation schemes.

State PensionState Pension

UK STATE PENSION: The State Pension pays a regular payment to most people during their life in retirement. The government old age pension starts when you reach the official retirement age.

Workplace and Personal Pensions GuideWorkplace Pensions

COMPANY PENSION RULES: The UK government operates a workplace pension scheme that supplies a monthly allowance to individuals who are older than the official retirement age. This welfare benefit also applies to support some widows, widowers, and disabled people.

Important Informaation iconSeek impartial or professional advice from an independent financial adviser before making investments.

State Pension, Company Pensions, and Personal Pension Rules Overview
Last Updated 2017