Personal Pension Schemes

1. Should You Have One?

The sooner you start saving for retirement, the better. But check any long-term contracts. Nearly all modern pension schemes permit you to move your money out without charges, but others have penalties.

1.1 Certain people are generally advised to make their own pension arrangements:

• Anyone who would otherwise rely solely on a state pension. Even if the basic pension is supplemented by a State Second Pension (formerly SERPS), this will not normally pay for a comfortable retirement (see National Insurance and state pensions).
• The self-employed.

1.2 If you belong to a company pension scheme, you could use a personal pension scheme to top it up.

• Following the tax simplification implemented in April 2006, members of company schemes can now save up to £235,000 each year towards their retirement, with tax benefits providing they observe certain restrictions (see 2.1, below).
• Opting out of a company pension into a personal pension is unlikely to make sense, because company schemes generally offer better benefits, most notably the employers' contribution.

1.3 Some people are excluded from investing in personal pensions.

• Those who are aged over 75.
• Those who are not resident in the UK for tax purposes (except for Crown Servants serving abroad, their spouses or civil partners).