What is a pension?
A pension is a way to grow your money for the long term and provide you with an income in retirement. You can access your pension from age 55 (going up to 57 from 6 April 2028).
There are 3 main types of pensions:
Workplace Pension
A workplace pension is a pension scheme set up by an employer to provide retirement benefits for its employees. If you’re employed, you’ll automatically be enrolled into a workplace pension as long as you:
are classed as a worker
usually work in the UK
earn £10,000+ a year
are over 22 (the government can change this age)
This is known as auto-enrolment. This helps more people have access to a pension scheme through their workplace. The minimum auto-enrolment contribution to an employee’s pension savings, based on qualifying earnings, is 8% but you/your employer can make higher contributions if you/they wish. You can read more about workplace pensions on the government website.
SIPP
A self-invested personal pension (SIPP) is a type of personal pension that gives you the freedom to invest and save for your retirement and gives you the ability to control how much goes in and when. A SIPP can be a tax-efficient way to boost your retirement savings. You can have a SIPP alongside other investments such as ISAs and workplace pensions. It’s not designed to replace a workplace pension. If you’re employed, a SIPP is meant to complement and work alongside it. If you’re self-employed, a SIPP is one way of saving for your retirement.
State Pension
The State Pension is provided by the government and the amount you get depends on the number of years you paid national insurance contributions. To see if you’ll get the full state pension, check your National Insurance contributions on the government website. You can also learn more about the new State Pension. The full rate of the current State Pension in the UK for 2024–25 is £221.20 per week, or £11,502 per year.
