Personal pensions | Pensions | Financial advice

Personal pensions

A Personal Pension Plan is an investment policy for retirement, designed to offer a lump sum and income in retirement. It is available to any United Kingdom resident who is under 75 years of age and is available from insurance companies, high street banks, investment organisations and some retailers (i.e. supermarkets and high street shops).

Personal Pension Plans are money purchase arrangements. This means that you make contributes to the plan, the money is invested and a fund is built up.

The amount of pension payable when you decide to retire is dependent upon:

• The amount of money paid into the scheme;
• How well the investment funds perform; and
• The 'annuity rate' at the date of retirement. An annuity rate is the factor used to convert the pension fund into a regular income.

Crystallisation age can be at any time from the age of 55 and there is no longer a requirement to take benefits by age 75. When you draw benefits, you can normally take up to 25% of the value of your fund as a tax-free lump sum. The remainder of the fund can be used to buy an annuity or 'secured pension' with an insurance company. (See section on Annuity Rates). Alternatively you can draw a flexible or capped income. (See sections on Post and Phased Retirement).