Private pensions are a way of building up a retirement fund that you can use in later life. You’ll contribute to the pot usually over a number of years, which is invested with the aim of growing the fund by the time you retire.
There is no limit to how much you can invest in your pension, but you can only invest either £40,000 or up to 100% of your income, whichever is lower, tax free in this tax year.
Currently, you can access your private pension from the age of 55, although this is set to rise to 57 by 2028. When you reach retirement age, you can withdraw your pension as a lump sum or take a regular income over time.
You won’t pay tax on any income or capital gains generated from your private pension, and you’ll receive tax relief on the contributions you make. When it comes to accessing your pension, you will typically have a 25% tax-free allowance, meaning you can:
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