How to start your own pension

If you have an employer, joining their workplace pension scheme is usually the best way to start a pension.

This is because you’ll receive contributions from your employer if you earn more than £6,240 a year. This tops up the amount you pay in and is extra money you’d miss out on if you didn’t join the scheme.

You usually need to pay in at least 5% of your wages  and your employer must contribute at least 3% –  but employer contributions can be much higher.

Your employer might also pay in more if you do too, called contribution matching.

Your employer will set up a workplace pension for you automatically if you:

• are between age 22 and the State Pension ageOpens in a new window

• earn more than £10,000 a year, £833 a month or £192 a week
• are a UK resident
• usually work in the UK and
• don’t already have a suitable workplace pension.

A pension is usually set up within three months of you meeting the criteria.

Don’t worry if you don’t meet the criteria, your employer must let you join if you ask and are between age 16 and 74.

For more information, see our guide How pension auto-enrolment works.

A personal or private pension is just one you set up yourself, often if you’re self-employed or want a separate pension to your employer.

All personal pensions are defined contribution schemes, which means the amount you’ll get in retirement depends on:

• the amount you pay in
• how well your invested money performs
• how much your provider charges.

The earliest you can take your pension is usually age 55 (57 from April 2028), unless you need to retire early due to ill-health. You can then choose how and when to take your money, including:

• taking up to 25% as tax-free cash and
• converting the rest into a guaranteed income or taking amounts as and when you need them.

For more information, see our guide about your options for taking a defined contribution pension.

There are three main types of personal pension. All will usually let you choose:

• how much you pay in, including regular or one-off payments
• how your money is invested – including letting the provider decide for you.

The only real differences are the fees you’ll pay, your options for how your money is invested and if there are any minimum amounts you must pay in:

• standard personal pensions – usually offer a range of ready-made investment funds so you can decide where your money is invested
• stakeholder pensions – have capped charges, lower minimum payments, fee-free transfers and usually offer a range of investment funds to choose from
• self-invested personal pensions – usually offer the widest choice of investment options to choose from, including company shares.

Which is best will often depend on whether you want to actively manage your pension and how much each provider will charge you.

For more information, see our guide How to choose your own pension investment options.

There are two ways to choose a pension provider and product:

• compare providers, fees and products yourself
• use a regulated financial adviser to recommend a product for you.

Comparison sites covering the whole market don’t exist, so you’ll usually need to manually search for personal pension providers.

Personal pensions are offered by many insurance companies, banks and building societies. 

When comparing providers, check for:

• fees and charges
• minimum and maximum contribution limits
• penalties to start and stop your contributions at any time
• available investment options
• opening hours for help and support
• reviews from existing customers.

A regulated financial adviser can tell you which type of personal pension is right for you and compare the market to recommend a suitable product.

You’ll usually pay a fee for this, but you must be told how much this is before you commit.

Our tool can help you find a retirement adviser or see our guide Choosing a financial adviser for more information.

 Ask each firm or adviser if they can recommend a pension from any provider on the market, as some might only work with certain providers.

If the pension they recommend turns out to be unsuitable, you can complain and ask for compensation.

Once you’ve chosen a pension product, check the provider is regulated by searching the FCA registerOpens in a new window

You can usually sign up online or over the phone. If you used a financial adviser, they might be able to help you set it up.

You normally have at least 30 days to change your mind and ask for a refund of any money you pay in, but always check what your provider’s ‘cooling off’ period is.

After this has passed, your money will usually be locked away until you’re 55 (57 from April 2028).

If you’re considering managing your investments, see our guide How to choose your own pension investment options.

Pension scams can be hard to spot, but they can be avoided. Do not sign up to a pension or invest any money because of a cold call, visit, email or text.

If you’re not sure about anything, stop. You can ask the pension provider to explain how their product works or ask someone else you trust for their opinion.

Only sign up to a pension if you’re happy and understand what you’re doing.

For more information, see our guide How to spot a pension scam.

Your pension provider might have a minimum amount you must pay in each month to keep it active, but you’ll usually need to save much more than this for a comfortable retirement.

Our Pension calculator will show you:

• how much you might need in retirement
• how much your pension might pay you
• how much extra you could get by changing your contributions.

The Retirement Living StandardsOpens in a new window also shows you how much you might need to have a:

• 'minimum' lifestyle - enough money to live on, plus entertainment and a holiday
• 'moderate' lifestyle - extra security and money for more holidays and entertainment, or
• 'comfortable' lifestyle - enough money so you can cover most things you want to do.

When you pay into a pension, you usually benefit from tax relief. This means the money you’d normally pay in tax is added to your pension instead.

Example: If you pay £80 into your pension, your provider will claim an extra £20 from the government so £100 is added in total.

All personal pension providers will automatically claim tax relief for you, but at a fixed rate of 20% for everyone. If you pay Income Tax at a higher rate than 20%, you’ll need to claim the extra tax relief yourself by:

•  contacting HMRCOpens in a new window or
•  completing a Self Assessment tax return.

You usually benefit from tax relief on all your pension savings, providing your contributions each year are not higher than:

• the amount you earn and
• your annual allowance – which is £60,000 for most.

For more information, see our guide How tax relief boosts your pension contributions.

Even if you’ve decided to let your pension provider manage your investments for you, it’s a good idea to regularly review your pension savings.

You can usually see the current value of your pension and your estimated retirement income by logging in to your pension provider’s online account. You should also receive an annual statement.

You can then see if you’re likely to need to change your contributions.

You can also check your State Pension forecastOpens in a new window on GOV.UK to see how much you’re on track to get and for ways to boost it.

For more information, see our guide How to prepare and plan for retirement.

As you get closer to retirement, it’s a good idea to start planning how and when you might want to take your pension. This might change the way you want to invest your money, so it’s best to be prepared.

For more information, see our guide about your options for taking a defined contribution pension.

If you’re 50 or over with a UK defined contribution pension, you can also have a free Pension Wise appointment.