Personal Pension Plans
A personal pension plan helps you save money for retirement and is available to any United Kingdom resident who is between the ages of 16 and 75 (Children under 16 cannot start a plan in their own right but a Legal Guardian can start one on their behalf). You, in conjunction with your adviser, choose the pension provider and make the arrangements for paying the contributions to the plan.
You can start a personal pension even if you have a workplace pension or if you’re self-employed and don’t have a workplace pension. You don’t have to be working to take out a Personal Pension Plan and you can also provide a Personal Pension Plan for your spouse/partner or your child/children.
When you contribute to a Personal Pension plan, your money is invested by the pension provider (usually an insurance company) to build up a fund/pension pot over a number of years.
Tax relief
If you’re a basic rate taxpayer, your pension provider will claim back Income Tax at the basic 20 per cent rate on your behalf on the contributions you make and add it to your pension pot. Higher-rate taxpayers claim the additional rebate through their tax returns.
Contribution limits
The Annual allowance (AA) is the most you or your employer can save into your pension pots before you must pay tax, The current total is £60,000* per tax year (6 April to 5 April). If you contribute more than that you will pay a tax charge.
Tax-free cash
Most schemes allow you to withdraw 25% of your fund tax-free from age 55 (57 from April 2028). Subsequent withdrawals are subject to income tax.
The size of your pension pot will depend on:
- the amount of money you paid into the plan
- the performance of the plan’s investments
- charges payable under the plan
- advice charges (where applicable)
Taking your pension
Although most personal pension schemes specify an age when you can start withdrawing benefits from your personal pension (usually between 60 and 65) you are allowed to do that from age 55 if you wish. You don’t have to stop work to draw benefits from your plan.
Death Benefits
If you die before the age of 75 and haven’t purchased an annuity, your beneficiaries can inherit the entire pension fund as a lump sum or draw an income from it completely free of tax. If you’re over 75 years of age when you die, there will be a tax to pay on any withdrawals made by the recipient of your fund.
*Tax year 2024/2025
Trust my hard earned savings to a banker to invest? Not me! I use Harmony Wealth Management. Harmony for friendly, simply explained, trustworthy and truly independent financial advice.
Mr Neil Smith has been looking after my mother's financial affairs for a number of years. He has always dealt with our queries promptly and he is always very professional and friendly, nothing is too much trouble. A great guy and we hope he will be acting on our behalf for many years to come.
Harmony Wealth have overseen our entire financial affairs from their inception and for many years previously by Neil.
We have found their impartial and independent advice invaluable, covering a wide area of our requirements, all of which has been handled with extreme confidentiality, punctuality, reliability and friendly professional service.
Nothing has been too much trouble and we have had no hesitation in recommending them to a number of friends and colleagues, all of whom have expressed their thanks for doing so.
The addition of a Will writing service and being able to arrange Lasting Powers of Attorney has been a much welcome benefit, thereby alleviating the need to engage other professionals in what is a private and delicate subject.
