Private Pension

What is a private pension?

A private pension is otherwise known as a personal pension and is a way of saving money through regular contributions or lump sum payments for your retirement.

Someone saving money into a private pension will do so through either regular contributions, usually on a monthly basis, or through a lump sum, and the money will be held in a pension fund. Any money paid into a private pension is stuck there until you retire, so if you want to be able to access the money another form of saving may be better for you.

The money in your private pension will be managed by the pension provider, who will usually appoint a fund manager to invest your money. A private pension is a great way of saving money so that you receive more than just the state pension in retirement.

Your fund manager will invest your money, along with the money of the other members of the private pension fund with the intention of increasing its value. You should always be aware that returns are not guaranteed and your pension can lose value.

You will select a level of risk, either in the selection of the pension, or within the private pension, and your money will be invested accordingly.

Generally speaking people are happy to take a bigger risk when they are younger as any gains will be great but any losses can be rectified later in life. As people near retirement they tend to opt for the lowest risk options, which are usually guaranteed interest government and bank bonds, with no real risk of losing money (bar the country going bust)

To invest in a private pension you must be a UK resident, who is at least 16 years old, and understand that your money will be held in pensions until your reach the retirement age (currently 55)

If you havn’t got a private pension but you have a state pension use or state pension calculator today.

Who can take out a private pension?

A private pension can be taken out be those who are employed, self employed or even not working.

In some situations private pensions may not be the right choice for you, including where occupational pensions are available. Often a pension offered by your employer will include contributions made by them, which can make a huge difference to the speed at which your pension fund grows.

For more information about a private pension or to use a private pension calculator goto our homepage today.