A personal pension

A personal pension is a tax-efficient savings plan that enables you to save for retirement.

The contributions attract tax relief and they can be made in various ways, either regularly, by lump sum or by a combination of both.

On retirement, up to 25% of the fund value can be taken as a tax-free cash lump sum. The remainder of the fund must be used to buy an annuity. (An annuity provides a guaranteed income for life in return for a lump sum investment.) Most contributions are invested on behalf of the saver by a specialist organisation and are invested in the financial markets in various ways.