What is a Pension and Pension Questions

The author of this blog is Ashley Hull.

 ‘59% of working adults said their lack of understanding of the (pension) system puts them off saving more into a pension.’

‘Fewer than 50% of people in the UK are saving enough for retirement.’

 Pension Definition

A tax efficient way of saving for your retirement. Imagine it as a long-term savings account.

What Different Types of Pensions Are There? 






Do I receive tax relief on my contributions?

  • If you make Personal Pension contributions, you receive tax relief on these – the idea being you do not pay the tax on money that goes into a pension


  • Person Earning £35,000 per year (Basic Rate Taxpayer) contributes £100 per month personally. This will receive an additional £25 and be added into the pension.

 How is my pension invested?

  • Pension can be invested into a wide variety of options
  • Cash & Cash Funds
  • Investment Funds
  • These can be sector specific i.e., North American Equities or Global Funds
  • Property
  • Via Funds
  • Real Estate Investment Trusts
  • Direct Commercial Property Holdings
  • Shares
  • Companies that make up the Stock Exchanges

 How do I Withdraw my pension (Workplace / Defined Contribution / Personal Pension)?

  • Tax Free Cash and Drawdown
  • You receive 25% of the value as a tax-free cash payment
  • The rest is used to provide you with income
  • You can choose how much income you receive
  • These payments are added to your income tax liability
  • Take It All in One
  • 25% of the withdrawal will be tax free
  • The remaining 75% will be added to your income tax liability
  • Buy an Annuity
  • This is where you give your pension to a Life Insurance Company who then pay you an income for life

What Happens to my Pension when I Die?

  • Workplace / Defined Contribution / Personal Pension
  • You have the choice of nominating beneficiaries who will receive the pension
  • It can be a great planning tool to pass on money to partners, children, grandchildren etc.
  • Check if your pension offers Dependents Drawdown – otherwise there could be some avoidable tax consequences for your chosen recipients
  • Defined Benefit Pension
  • This is scheme specific but usually 50% of the income will be paid to a spouse / dependent beneficiary and children are usually included

If you would like to discuss your financial goals further or another financial planning matter please get in touch with Ashley Hull, Ashley.hull@beaufortfinancial.co.uk or via mobile: 07741 242151.