The short version: A pension is a tax efficient way to save for retirement. You get tax relief on what you put in, it grows tax free, and you can take some of it tax free when you retire. The rest is taxed as income.
What types are there?
Workplace pensions are arranged by your employer. They contribute, you contribute, and you get tax relief on top. If you’re eligible, your employer must auto enrol you.
Personal pensions you set up yourself. Useful if you’re self employed or want to save more than your workplace scheme allows.
The State Pension is what the government pays based on your National Insurance record. It’s not much on its own, which is why private pensions matter.
What about tax relief?
Your pension contributions come out of pre tax income, or the pension provider claims basic rate tax back for you. Higher rate taxpayers can claim extra relief through Self Assessment.
When can you access it?
Currently from age 55 (rising to 57 in 2028). You can take 25% tax free, then the rest is taxed as income when you draw it.
Want to check your pension is on track? Let’s look at your retirement planning.
