Pensions

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.

Annuities

If you have a defined contribution pension you will 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
  • interest rates
  • your health (sometimes)

You don’t have to buy an annuity from your pension provider.  It is 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 is 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 will need the name of the employer or the pension provider.

The Pension Tracing Service won’t tell you if you have a pension.  You will have to contact the pension administrator yourself to find out.

Next steps

Contact the Pensions Advisory Service for independent information and guidance on pensions http://www.pensionsadvisoryservice.org.uk/

The Pension Tracing Service helps you find lost pensions https://www.gov.uk/find-pension-contact-details

 

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