Personal pensions: set up your own private pension

A personal pension is a type of private pension you can set up yourself. This lets you save over a number of years to give you money to live on when you’re older.

You’re able to choose the pension provider and can often decide: 

• how much and how often to pay in

• how your money is invested – including if you want to manage it yourself. 

You can start most personal pensions from age 18 or open one on behalf of someone younger – often to save for a child or grandchild. 

You usually cannot open or pay into a personal pension after you reach age 75, unless you’re transferring across a pension you’ve already contributed to. 

Some employers use personal pensions for their workplace pension schemes. This is called a group personal pension.

Your employer will set up the pension for you, but you'll have an individual contract with the provider they choose. 

For more information, see our guide about workplace pension schemes. 

All personal pensions are defined contribution schemes. This means the amount you'll get depends on:

• how much is paid in

• how well your invested money performs

• the fees your provider charges 

• how and when you take your pension money.

If you pay into a pension, the government usually adds a top-up payment called tax relief. This is the money you’d normally pay in Income Tax. 

Most personal pension providers will claim tax relief automatically for you at a fixed rate of 20%. This means a £100 contribution into your pension will cost you £80.

If you normally pay Income Tax above 20%, you can claim the extra tax relief by:

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

If you pay Income Tax at 40%, this means a £100 pension contribution will cost you £60.

Each tax year until you're 75, you can usually get tax relief on all your pension contributions as long as: 

• you don’t pay in more than you earn and

• all payments in are less than the annual allowance – £60,000 for most. 

If you earn under £3,600, you can get tax relief on up to £2,880 of your pension contributions. 

For more information, see our guides: 

• Why should I save into a pension scheme?

• How tax relief boosts your pension savings

Your pension money is invested so it should grow over many years. Investment growth is one of the biggest ways your pension can increase, but it’s not guaranteed.

Most personal pension providers will manage your money and pick the investments for you, unless you want to choose yourself. 

This typically means selecting between a range of investment funds offered by your provider. An investment fund often groups a mixture of investments together, like shares in UK or European companies. 

The pension provider’s charges – including a management fee – cover the cost of investing. 

For more information, see our guides:

• How to choose your own pension investment options

• Pension scheme fees and charges explained

The earliest you can take your pension is usually age 55 (57 from April 2028), unless you need to retire early due to poor health. But many schemes are designed to start paying from around age 65.

When you’re ready to take your pension, you can choose how to use your money. This includes taking up to 25% as tax-free cash and:

• leaving the rest invested until you need it 

• converting the rest into guaranteed income

• setting up a flexible income that you can stop or change at any time

• taking the rest as one or more lump sums.

For all your options, see our guide about taking a defined contribution pension. 

If you’re 50 or over, you can also get a free Pension Wise appointment to understand the different ways you can take your pension.   

There are three main types of personal pension:

• standard personal pensions – these usually offer a range of ready-made investment funds so you can decide where your money is invested

• stakeholder pensions – these have capped charges, lower minimum payments, fee-free transfers and usually offer a range of investment funds to choose from

• self-invested personal pensions – these usually offer the widest choice of investment options to choose from, including company shares. 

The only real differences between them 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. 

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

If you have an employer, paying into their workplace pension could give you a bigger pension pot at retirement than a personal pension – unless you want a separate pension alongside that one. 

This is because you’ll usually get extra contributions from your employer and the scheme charges are often lower. Your employer might even pay in more if you do, called contribution matching. 

Find out more in our guide about workplace pension schemes. 

Your pension provider might have a minimum amount you must pay in each month, 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  
• ‘comfortable’ lifestyle – enough money so you can cover most things you want to do.  

A pension typically grows faster than other types of savings or investments because tax relief boosts your contributions. Plus, fees and charges are generally lower than other investment products. 

But as the money is locked away until you’re at least 55 (57 after April 2028), it’s a good idea to have other savings you can access.  

For more information, see our saving and investment guides.  

There are no comparison sites for personal pensions, so you’ll either need to:

• manually search and compare your options – many insurance companies, banks and building societies offer personal pensions

• pay a financial adviser to recommend a provider and product for you.

For step-by-step help, see our guide How to start your own pension. 

Be careful before transferring your existing pensions, you might lose valuable benefits by leaving your current provider.   

For more information, see our guide about transferring pensions. 

Your pension provider will ask you to complete an expression of wish form. This tells them who you’d like to receive your pension after you die, so make sure to keep it updated.

For more information, including how much would be taxed, see our guide What happens to my pension when I die?