At its core, a pension is a long-term savings pot designed to fund your retirement. You contribute money during your working life, it's invested to help it grow, and you use the resulting fund as an income when you stop working.

Most UK pensions fall into two main categories:

Defined Contribution (DC)

• What it is: You build a personal pot of money. Its final value depends on contributions and investment performance.
• Who takes the risk: You, the individual member.
• Examples: Most modern Workplace Pensions, Personal Pensions, and Self-Invested Personal Pensions (SIPPs).
• Access: You can usually start taking money from age 55 (rising to 57 in 2028), often with a 25% tax-free lump sum.

Defined Benefit (DB)

• What it is: Provides a guaranteed, lifelong income based on your salary and years of service in the scheme.
• Who takes the risk: Your employer.
• Examples: ‘Final Salary’ or ‘Career Average’ schemes, common in the public sector.
• Access: The scheme has a set retirement age when you can draw your guaranteed pension.

If you're an employee, a workplace pension is your primary tool for retirement saving. Under the Auto-Enrolment scheme, your employer is legally required to enrol you into a pension and contribute to it.

How Contributions Work

For the current tax year, the minimum total contribution is 8% of your qualifying earnings. This is typically broken down as:

• 5% from your salary (this includes tax relief from the government).
• 3% from your employer.

Crucially, you can choose to contribute more than the minimum to boost your retirement savings, up to annual limits.

Key benefits of a workplace pension

• Employer contributions: This is essentially part of your remuneration package – don't opt out without careful consideration.
• Tax relief: Your contributions are boosted by the government. Basic-rate relief (20%) is added automatically. Higher-rate taxpayers can claim back further relief via their tax return.
• Salary sacrifice: Some schemes allow you to exchange part of your salary for an increased employer pension contribution, reducing your tax and National Insurance payments.

The State Pension is the foundation of retirement income for most people in the UK. It is paid by the government once you reach State Pension age.

Eligibility for the new State Pension

• Your eligibility is based on your National Insurance (NI) record.
• You need at least 10 qualifying years of NI contributions to receive any State Pension.
• You need 35 qualifying years to receive the full new State Pension.

How much is the State Pension?

The full new State Pension for the 2024/2025 tax year is £221.20 per week. This amount is reviewed by the government each year.

Your amount may be higher if you deferred taking it or built up a large ‘Additional State Pension’ under the old system. If you're on a low income in retirement, you may also qualify for Pension Credit to top up your income.

Find out what you'll get

The best way to see how much you are on track to receive and when you'll be eligible is to get an official forecast from the government.

Get Your State Pension Forecast 

When you're self-employed, you don't benefit from auto-enrolment or employer contributions, making proactive saving essential. A Personal Pension is the most common vehicle for your retirement savings.

Why saving is critical

Without the nudge of a workplace scheme, many self-employed individuals risk not saving enough for retirement. However, the tax advantages of contributing to a personal pension are significant.

How It Works

• You choose the provider: You select a pension provider and decide how much to contribute.
• Government tax relief: For every £80 you contribute, the government automatically adds £20 in basic-rate tax relief, turning it into £100 in your pot. Higher and additional-rate taxpayers can claim further relief.
• Investment growth: You choose from a range of funds, and your savings grow free of Capital Gains and Income Tax.

Even irregular contributions during periods of good income can make a substantial difference to your final retirement fund.