A private pension is a way for you or your employer to save for your later life. If you have a private pension, you may have to make important decisions about how you want to receive it when you retire.
Coronavirus (COVID-19) and your pension
The Pension Protection Fund have created a guide called COVID-19 and your pension: where to get help for people who have retired, or who are planning for retirement, about how the coronavirus pandemic might affect their pension. It covers some frequently asked questions and explains where you can go for advice and support with decisions about your pension.
There are two main types of private pension:
defined contribution – a pension pot based on how much is paid in
defined benefit – a pension pot based on your salary and how long you’ve worked for your employer.
What you’ll get
Defined contribution pensions can be workplace pensions or private pensions that you arrange. The money paid in is put into investments by the pension provider. What you’ll get depends on:
how much you paid in
how well the investments have done
how you decide to take the money.
Defined benefit pensions don’t depend on investments. They are based on your salary and how long you worked for your employer.
You usually get 25% of your pension pot tax free.
If you have a defined contribution pension, you'll have to decide what to do with it when you retire. One option is to buy an annuity with some or all of your pension pot. An annuity pays a regular income for a set period or for life. What you’ll get depends on a number of factors, including:
your age and gender
the size of your pension pot
your health (sometimes).
You don’t have to buy an annuity from your pension provider. It's important to shop around because, when you buy an annuity, you can’t change it later.
Beware of scammers
People with a defined contribution pension no longer have to buy an annuity. They can choose to withdraw all or some of their money as a lump sum and this has created new opportunities for scammers. It's important to get independent financial advice before making any decision about what to do with your pension pot.
Finding lost pensions
If you changed jobs a number of times when you were working, you might have a pension with more than one employer. The Pension Tracing Service is free and can help you track down a lost pension. You'll need the name of the employer or the pension provider.
The Pension Tracing Service won’t tell you if you have a pension. You'll have to contact the pension administrator yourself to find out.