What is a private pension?

Private pensions are a type of pension that you can set up to help you save money for retirement. Their value is usually based on how much money you’ve paid in and how your investments perform.

A private pension - also called a personal pension - is a product that you can use to save money for retirement. These are usually defined contribution pensions, which means the money you receive at retirement is based on the money you’ve paid in and the performance of your investments.

How private pensions work

Private pensions work similarly to workplace pensions but are set up by you rather than your employer.

How to set up a private pension

You can set up regular contributions (e.g. monthly) or make one-off payments into your fund, and your pension provider will add tax relief.

The money you put into your personal pension will usually be invested in a range of assets like shares, bonds, property and cash. When you start your pension, you’ll probably get a choice of pension funds to select from, based on how much risk you’re willing to take.

When you reach the age of 55, you can take your private pension as a lump sum, use it to buy an annuity (a guaranteed income) or leave it invested and take out cash amounts when you need to via drawdown. You can find more information about this on our page about cashing in your pension.

Our PensionBee plans are private pensions that you can manage easily online. You can find out more about setting up a pension in our Pension Academy video.

Tax relief on private pensions

You get tax relief when you pay into a private pension. Your provider will automatically claim this at the basic rate and add it to your pension pot.

You get tax top ups of 25% on contributions that you make, which means that if you pay £100 into your pension, HMRC adds another £25, bringing your total contribution to £125.

Higher and additional rate taxpayers can claim a further 25% and 31% respectively through their Self-Assessment tax returns. For 2024/25 you can get tax relief on your pension contributions up to 100% of your salary or £60,000 (whichever is lower).

For more information about paying into a pension and tax relief, see our page on making pension contributions.

Who needs a private pension?

Private and workplace pensions can be good ways of saving for retirement. They can be really important for bolstering any income you may receive from the State Pension, which is currently just £11,502.40 a year.

You can open a private pension even if you’ve got a workplace pension. Employers are required to contribute to their employees’ pension plans under Auto Enrolment, which can make workplace pensions particularly attractive.

If you don’t have a workplace pension - perhaps because you’ve opted out of your company pension scheme or you’re self-employed - then starting a private pension is one way of kickstarting your retirement savings. Don’t favour one type of pension over the other, however, and try to save into both workplace and private options. Employers contribute into workplace pensions after all, adding a little more to your pot.

PensionBee private pensions

If you’re looking for private pension companies, consider investing in a private pension with PensionBee. We can help you start a private pension in the UK by combining your pensions into a brand new private pension plan. We just need a few simple details and we’ll get to work transferring your old pensions.

Once complete, you’ll be able to keep track of your retirement savings online, and your employer can also choose to contribute. If you do not currently have old pensions to combine you can also start a self-employed pension.

Risk warning

As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.

Last edited: 06-04-2024

Combine your private pensions

At PensionBee, we do things differently. There are no hidden service fees, platform fees, or any other kind of confusing fees - just one clear annual fee.

Get started

Mobile PensionBee analytics chart
Mobile PensionBee analytics chart
Apple Store logo Google Store logo

Have a question?Call our UK team020 3457 8444

Monday-Friday: 9:30am-5pm