Personal pensions

As a member of the Armed Forces you are automatically enrolled into the Armed Forces pension scheme - see Military pensions. You can opt out, but it is worth noting that it is among the best of all the Public Service pension schemes and you don’t pay a penny into it. If you wish to top up your benefits you have the opportunity to:

  • Buy Added Pension
  • Take out a stakeholder pension (see 2012DIN01-210 on the intranet)

You can find out more about all these options in the booklet Increasing Benefits or by talking to your unit admin.

However, if you’re leaving the Armed Forces and want to stay MoneyFit by keeping your retirement planning on track, you might consider starting a personal pension. Of course, if you’re going to work for a new employer find out if they have a workplace pension scheme that you can join first.

Your partner should also consider whether their pension arrangements are adequate – circumstances may change and they may not always be able to rely on your pension. If you have the money, you can help get them started by paying into a pension for them - you can pay £2,880 into a pension scheme each year for someone, even if they have no income, and the government will top it up to £3,600 - see the website for more information.

See also this video on the importance of retirement savings from the Money Advice Service.

Personal pensions

A personal pension is a type of defined-contribution pension. You choose the provider and make arrangements for your contributions to be paid. If you haven't got a workplace pension, getting a personal pension could be a good way of saving for retirement.

Use a pension calculator

With the pension calculator on the Money Advice Service's website, you can estimate the amount of income you could get when you retire. This is worked out from the level of regular contributions that you choose to pay into your pension pot. Just enter the amount of the contributions and it will work out what your pension pot could be worth if it grows at certain rates each year.

The figures you see in the pension calculator are estimates - they are not guaranteed. The actual retirement income you receive will be affected by future changes in things like interest rates, inflation and investment growth.

Tax relief

Your pension provider will claim tax relief at the basic rate and add it to your pension pot. If you're a higher rate taxpayer, you'll need to claim the additional rebate through your tax return. You also choose where you want your contributions to be invested from a range of funds offered by your provider.

How they work

Your pension pot builds in line with the contributions you make, investment returns and tax relief. It helps to think of defined-contribution pensions as having two stages.

Stage 1 – While you are working

The fund is usually invested in stocks and shares, along with other investments, with the aim of growing the fund over the years before you retire. You can usually choose from a range of funds to invest in. Remember that the value of investments may go up or down.
If you need help with deciding how to invest your contributions, see the Investment choices planner on the Pensions Advisory Service website.

Stage 2 – When you retire

bear in mind

You can't touch the money you invest in a pension until your retirement.

The size of your pension pot when you retire will depend on:

  • How much you pay into your pension pot
  • How long you save for
  • How much, if anything, your employer pays in
  • How well your investments have performed
  • What charges have been taken out of your fund by your pension provider

Following changes introduced in April 2015 you now have more choice and flexibility than ever before over how and when you can take money from your pension pot. Take your time to understand your options - see the Pension Wise website. 

Personal pensions at work

A personal pension may be offered through your employer. These are called group personal pensions. To find out more about this type of pension, see the Pensions Advisory Service website. 

Changing jobs

If you change jobs, check when your new employer will enrol you into a workplace pension scheme. You can continue paying into an existing personal pension, but you may find you'll be better off joining your employer's workplace pension scheme, especially if the employer contributes. Compare the benefits available through your employer's scheme with your personal pension.

If you decide to stop paying into a personal pension, you can leave the pension pot to carry on growing, but check to see if there are extra charges for doing this.

Last reviewed: 15/05/2019

This content has been provided by the Money Advice Service