What is a pension?
A pension scheme is simply a way of saving money now and investing it in order to use as income when you stop working. You can access the money in your pension from age 55. It also has lots of tax advantages compared to other ways of saving for your retirement. Find out more about pension tax relief.
There are many different types of pension scheme. Your employer may offer a pension scheme which they pay into, or you may choose to set one up yourself. There’s also the state pension which is provided by the government.
When you decide to retire, you have a number of options for taking your pension income. With many pensions you can take a tax-free lump sum, and others offer a regular income.
Personal pensions
The Nutmeg pension is a type of personal pension. Generally, you can get tax relief on up to £40,000 per year or the value of your relevant earnings, whichever figure is lower. If you’re a basic rate taxpayer, the government adds 25% of any amounts you put in. If you pay a higher rate of tax, then you can claim even more via your tax return form. Find out more about pension tax relief.
You can start a Nutmeg personal pension with as little as £500 and make further contributions in regular instalments or ad hoc lump sums.
You generally cannot withdraw any money from your pension until you're 55.
Workplace pensions
Many people also have a pension scheme with their employer, known as a
workplace pension. Typically, you will automatically pay a percentage of your
monthly salary into the scheme and your employer may match those
contributions, up to a certain amount.
Find out more about
how pensions work.
State pension
You may also make national insurance contributions out of your salary, which could entitle you to a state pension when you reach retirement age. To find out what you could be eligible for and when you could be entitled to receive it, please check the latest guidance on the government's website.