Pensions that you organise yourself are generally called personal pensions.
These can be seen as a special kind of savings account. The advantage is that you get a good tax break but in return your money is tied up until you use it to arrange a pension. Recent changes give you more flexibility about how you turn your savings into income, but it is still a long term investment that you cannot dip into for such things as buying a house or starting a business. You set up a personal pension with an insurance company, bank or other finance company.
One kind of personal pension is the stakeholder pension. Stakeholder pensions are low-charge, flexible and portable pensions that allow you to start by contributing as little as £20 a month.
If you are self-employed or work for a company that does not provide a workplace scheme then a personal pension is your only option for building up a pension on top of state provision.
If you work for a company or organisation that does provide a pension plan, saving through this is almost always a better option as your employer may also contribute to it, and the charges will probably be lower than if you set up your own pension. You can however make extra savings on top of a workplace pension, and the options for most people include stakeholder and other personal pensions.
Employers can provide a gateway to two types of personal pension – stakeholder pensions and group personal pension schemes, usually known as GPPs .These are still treated as personal pensions for tax and legal purposes, but usually your employer will deduct your contribution from your pay and give it straight to the pension provider.
You can read more about personal pensions on the Money Advice Service website.
