Pension Academy video series

Episode 1: What is a pension?

Key takeaways

A pension is a savings product which invests your money into a diverse range of assets, like the stock market.

Pensions are designed to provide you with an income after you stop working, and can't be accessed until the age of 55 (57 from 2028).

You may have a workplace pension (set up by an employer) and you can also set up a personal pension yourself.

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Hi and welcome to PensionBee’s Pension Academy! It’s great to have you here. I’m Patricia Bright and I’m really excited to be guiding you towards feeling pension confident - which is what this series is all about.

Now, I don’t know about you, but when I first started working, saving into a pension was the last thing on my mind. I was more interested in spending my money than saving it. And it wasn’t until my 30s that I started taking my finances a bit more seriously. Thankfully, you can start a pension at any age. And you can adjust the amount you put into a pension at any time. So there’s really no better time to take control of your pension than today. And that’s exactly what we’re going to do in this easy-to-follow series.

Together, with the team at PensionBee, we’ve prepared these videos to cover all the essentials you need to take control of your pension. And it’s been written and fact checked by PensionBee’s own experts. So you can be confident that everything we cover is accurate and up to date. Are you ready? Let’s go!

So let’s start with the basics... What exactly is a pension? Well, it’s something that helps to grow your money over time so you have enough to live off when you’re retired and don’t fancy working anymore. It’s a savings product that works by investing the money you put in into things like the stock market. If the value of those investments rise, so does your pension balance. So by the time you retire, your pension should be worth much more than the money you originally paid into it.* Of course, the more you pay in, and the earlier you start, the larger your pension will be when you retire.

There are a few different types of pensions, but the one that’s most common is the Workplace Pension. This is offered through the company you work for and usually requires you and your employer to both pay into it. You can also set up your own Personal Pension, which might suit you if you’re self-employed or want to be more involved in deciding where your money’s invested. Both of these pensions are usually types of Defined Contribution pensions, which is just a fancy name for pensions that perform based on the amount you pay in and how those investments perform over time. But there’s also the Defined Benefit pension, which your parents might have received if they’re over a certain age. They’re less common now, but they’re considered really valuable because the amount you receive in retirement is based on your salary and the number of years you worked at a company - not the amount you paid in.

Another type of pension that you might have heard of is the Self-Invested Personal Pension - otherwise known as a ‘SIPP’. As the name suggests, this is a type of pension where you manage the investments yourself. SIPPs offer more flexibility than traditional pensions, since you can choose exactly what investments to make. But you’ll need a good understanding of investment strategy and a chunk of self-confidence to manage it effectively. We’re not going to go into SIPPs in this series, but you can read up on them on the PensionBee website if you want to learn more.

Unlike other savings products, pensions can offer some really great perks. If you’ve got a pension through the company you work for, your employer will pay in at least 3% of your qualifying salary. But that’s just the legal minimum - some will pay in much more. And whatever you choose to pay in, the government will usually top up by an extra 25%. So you’ll get an extra 25p on top of every £1 you pay in, for free! I really wish someone told me that when I was younger.

*Assuming standardised assumptions in line with long-term pension returns. Past performance is not a guarantee of future returns.

This video was presented by Patricia Bright on behalf of PensionBee. Patricia Bright isn't a financial adviser and the views and opinions expressed in this informative video are those of Patricia alone and do not constitute financial advice.

The content of this video has been reviewed by the pension experts at PensionBee and was confirmed to be correct and in line with current HMRC guidelines and legislation based on their understanding of current tax legislation as of 4 August 2023.

Remember, as with all investments, your capital is at risk.

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