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Best Pension Providers for Private Pensions

Choosing the best pension provider for your circumstances can literally save you thousands over time. This is hopefully a relationship you will have for many years to come and the fees, available investments, and minimum pension contributions can all affect your outcomes.

I’ve reviewed and analysed every company in order to provide you with my top list of personal pension providers in the UK.

My picks for the top pension providers

Whilst this will provide you with a brief overview of the costs and investment choices at the best private pension providers, I suggest you continue to read the rest of the article as there are other considerations that may affect your choice.

Nutmeg

BEST OVERALL

Nutmeg

Investment Options: Ready-made portfolios
Annual Fee: 0.44% – 0.94%
Min. Investment: £500

Pensionbee

BEST FOR COMBINING PENIONS

Pensionbee

Ready-made portfolios
Annual Fee: 0.28% – 0.95%
Min. Investment: £0

AJ Bell Youinvest

AJ Bell

Pensions Options: DIY & Ready-made
Annual Fee: 0% – 0.25%
Min. Investment: £1,000 lump-sum. No minimum for regular pension contributions

Profile Pensions

Profile Pensions

Investment Options: DIY & Ready-made
Annual Fee: 0.12% – 0.6%
Min. Investment: £0

Hargreaves Lansdown

Hargreaves Lansdown

Investment Options: DIY & Ready-made
Annual Fee: 0.1% – 0.45%
Min. Investment: £100 lump-sum or £25 a month

Interactive Investor

Interactive Investor

Annual Fee: £239.88
Min. Investment: £0

Penfold Pensions

Penfold

Best for Self-employed

Annual Fee: 0.4% – 0.88%
Min. Investment: £0

Vanguard

Vanguard

Investment Options: DIY & Ready-made
Annual Fee: 0.15% capped at £375
Min. Investment: £500 lump sum or £100 per month

Moneyfarm

Moneyfarm

Investment Options: Ready-made
Annual Fee: 0.35% – 0.75%
Min. Investment: £500

Best personal pension provider for small pension pots

AJ Bell Pension

AJ Bell

AJ Bell represent one of the best value pensions available in the UK market. For smaller pots their fees start at just 0.25% and the fund dealing costs come in at only £1.50. They consistently come in as the cheapest stocks and shares SIPPs for investors who like to build their own portfolio from a range of shares, investment trusts or ETFs.

There are also excellent ready-made options for less confident investors and AJ Bell have won the Which Recommended Provider for SIPPs for the last two years in a row.

Best personal pension provider for large pension pots

Interactive Investor SIPP

Interactive Investor

Interactive Investor is one of the few companies that offer a flat fee, making them the most economical option for people who have already accumulated a large pension pot. They also have an extensive list of available investments making them a perfect choice for experienced investors who are apt at picking and choosing their own investments to build a diversified portfolio.

There are also a range of funds to choose from should you require more of a ready-made option, including the Vanguard Lifestrategy funds which should you have more than £160,000 invested, could work out cheaper at Interactive Investor than at Vanguard.

Best personal pension provider for actively managed investments

Nutmeg Pension

Nutmeg

Nutmeg is one of the largest and most trusted online platforms that offer three ready-made portfolios with seven different risk levels. Nutmeg offer novice investors a complete robo-advisory service, using a simple questionnaire to determine your risk level and build the right portfolio for you.

Best personal pension provider for ease of use

Pensionbee SIPP

Pensionbee

PensionBee is a dedicated pension service that focuses on providing pension savers with a holistic, quick, and easy personal pension including help consolidating all your old pensions into one, easy to manage pension. PensionBee offer nine pension funds to choose from including their newly launched Fossil Fuel Free Plan and the Future World Plan for ethical investors.

This really is the perfect solution for people with limited time and experience who would rather have the entire process handled for them.

Best personal pension provider for self-employed people

Penfold Pension

Penfold

Penfold is a provider that markets itself as being specifically aimed at self employed people. Everything at Penfold is designed to save you time and make saving for your retirement savings is as easy as possible. Opening an account can be completed in 5 minutes and once up and running Penfold offer a completely flexible solution that can adapt to changes in your income.

Penfold also offer support locating and consolidating existing pensions, as well as advice on the best plan for you and how much capital you should be looking to set aside.

What are the different types of pensions?

Paying into a pension is the most efficient way to save for a retirement income, but there are three different types of pensions in the UK and it’s important you understand the differences.

State pensions

The State Pension is available to everyone in the UK who has paid at least 10 years of National Insurance Contributions. The amount you receive from your state pension is based on the total value of your National Insurance Contributions but the maximum amount you can get is currently £179.60 a week. This is rarely an adequate sum to live off and therefore the state pension is often used in addition to a Private Pension or a Workplace Pension. The current state pension age is 66 however this is set to rise to 67 between 2026 and 2027.

Workplace pensions

Any employee between the age of 22 and 66, who earns in excess of £10,000 a year, must be auto-enrolled into a workplace pension scheme by their employer.

Your employer is also obliged to contribute towards your workplace pension and must either put your workplace pension in a saving pot or alternatively invest it in a fund. Your workplace pension pot is then paid to you as a set percentage of your salary upon your retirement.

Workplace pensions are paid to employees in addition to their state pension when they reach state pension age.

Do I have a workplace pension?

Since February 2018, employers have been required to enrol any employee over the age of 22 and earning in excess of £10,000 a year into a workplace pension scheme. There is the option to opt out, however, unless you have taken this option, if you fit this criteria it is likely you have existing workplace pensions.

The UK government now have a pension finding service which can be accessed here. Alternatively, many of the pension companies listed above provide this service for free as part of their pension plans.

Private pensions

Private pension schemes are set up and managed by the private pension holder and allow you to pay in a sum of money as determined by you, into a pot which is then invested towards your retirement savings.

Private Pensions attract a healthy tax relief of 20% for basic rate taxpayers, therefore, for a £100 deposit, you would only be required to pay £80, with the government paying in a further £20. However, how you are taxed will always depend on your personal circumstances, and pension and tax rules can change.

You are solely responsible the money invested in your private pension, however, you are unable to access your private pension before the age of 55.

There are three main types of private pensions:

1. A personal pension plan

A personal pension plan is solely managed by the company you appoint, on your behalf. The company will choose your investments or alternatively give you a limited choice of investments and this is then maintained by your chosen provider.

2. Self-invested personal pension (SIPP)

This is the pension scheme that gives you the most control over how your pension fund is invested. With a self invested personal pension (SIPP) you can usually choose from a wide range of pension funds, shares and other assets.

3. Stakeholder Pension

Stakeholder pensions work in a very similar way to a personal pension, however, stakeholder pension providers must adhere to strict government standards. Firstly, any annual charges must be limited to 1.5% of the pot size for the first 10 years and 1% after that. They must also allow for low minimum contributions and offer flexibility including stopping and starting payments. This makes them ideal for self-employed workers who may not have a regular income.

A stakeholder pension will usually invest in a fairly small range of funds which are all selected on your behalf by the provider. This makes them very low maintenance, although the fees you pay will often be slightly higher than what you would pay for a self invested personal pension. Usually, a stakeholder pension will be invested in very low-risk funds, which can lead to low growth, although as always with investing, this is not a certainty. It would be worthwhile checking the default fund for the stakeholder pension you are considering.

Can I have a workplace pension and a personal pension?

Yes, you are free to save into more than one type of pension, however, your contribution limits, in order to receive the government top up, remain the same across all your pensions:

  • 100% of your annual earnings
  • £40,000 a year cap
  • £1,073,000 lifetime allowance

What is a ready-made personal pension?

For people who are not enrolled in a workplace pension, this is the quickest and easiest way to save for your retirement. Once you have chosen your provider you only have two choices remaining:

  • The amount you wish to save each month
  • The level of risk you wish to take

Some providers will even help you identify the level of risk, based on your age and attitude.

This type of pension will usually allow savers to add lump sums to their pension pot, on top of their regular monthly pension contributions. Savers require no previous knowledge or investment skills in order to utilise a ready-made personal pension and any tax relief is also handled by the provider.

PensionBee, MoneyBox, and Moneyfarm all exclusively offer ready-made personal pensions.

What is the tax relief on private pensions?

Any income tax you have paid on money you then contribute to your private pension is paid back via tax relief. In addition to this, any earnings on your investments within your pension are free of tax.

Therefore, every contribution to your private pension will earn an additional 20% for basic rate taxpayers, 40% for higher rate taxpayers and 45% for additional rate taxpayers.

So if you are a basic rate taxpayer and you pay £80 into your pension, the government will top this up with an additional £20 in the form of tax relief. There are however limits to this, and you can’t pay in excess of your total salary in any given year. There is also a lifetime allowance of £1,073,100* for all pension contributions, after which point you won’t earn the tax top-up.

*Check the pension schemes rates and allowances on the UK Government website for the latest and historical pension allowances.

Can you transfer pensions?

Yes. Today most workers will have multiple jobs, each with their own pension scheme that they are auto-enrolled in. It is often a good idea to consolidate all these pensions into one, easy to manage pot rather than lots of little pots that are often left languishing away.

There are plenty of pension providers who will help you with this service, including PensionBee, Moneybox and Penfold who have dedicated pension consolidation services that can help locate and transfer your pensions for you.

Be aware, that should you take out your pension as an unauthorised lump sum, this will be classed as an ‘unauthorised payment’ and you will subsequently be required to pay tax on the amount.

Some providers can levy a charge on transfers so it is best to speak to both your current provider and the provider you wish to move your pension savings to before conducting a transfer.

Choosing the best private pension for you

In order to find the best provider for your unique requirements you should take the following into consideration:

Your investment knowledge and experience

If you have no previous investment knowledge or experience, then you would be better off choosing a ready-made pension, such as you would find at PensionBee, Moneybox or Vanguard. With this option, it is simply a case of opening an account, transferring your pension across, and selecting the fund with the correct level of risk.

For people with extensive investment experience who would prefer to manage their own investments, a platform like Interactive Investor or Hargreaves Lansdown would provide the best range of assets for you to choose from.

The size of your pension fund

If you are transferring an existing pension fund into your new provider, then you need to take into account the size of your fund in order to match yourself with the most cost-effective fee structure. Larger funds may benefit from a flat fee, whereas smaller funds or people who are just starting a pension, would benefit from a percentage fee structure.

Whether you are looking to consolidate multiple existing pensions

If you are looking to consolidate multiple existing pensions then you may want to consider a provider who has a consolidation service such as PensionBee. They will do most of the leg work for you, potentially saving you a significant amount of time.

Minimum contributions

Make sure you are aware of the minimum pension contributions for the private pension providers you are considering and ensure they fall within a range that you can afford. Many private pension providers will also require a lump sum to open a pension, although some pension providers will allow new customers to open an account with no minimum pension contribution.

Annual fees and other charges

Always compare the pension fees and charges for any pensions you are considering ensuring you are aware of any annual fees, transaction fees, fund management costs and also any hidden fees such as a one-off cost for transferring your investments, administration fees, and penalties.

Alternative ways to save for your retirement

Another excellent option when it comes to saving for your retirement is to open a Lifetime ISA. Much like a pension, a Lifetime ISA attracts a healthy government bonus of 25%, which for basic rate taxpayers is even more attractive than the Pension bonus of 20%.

However, there are stringent limits to the Lifetime ISA, as the maximum annual contribution, whilst still attracting the bonus is £4,000. The Lifetime ISA is also only available to people between the age of 18 and 39.

One of the advantages of the Lifetime ISA is that it can be accessed upon retirement, or alternatively, the savings held within the ISA can be accessed at any time as a tax-free lump sum and used to purchase a home. For more information on Lifetime ISAs please refer to my guide to Best Lifetime ISA for UK Savers.

How much money should you save into your pension?

This very much depends on your unique circumstances and what sort of lifestyle you wish to achieve in your retirement. However, as a rule of thumb, you should look to contribute a percentage of your salary that is half your current age.

Therefore, if you are 40 years old, you should be contributing 20% of your salary to your pension. There is also access to free pension calculators online so you can gain a picture of your financial future and check whether you are on track to reaching your retirement plans.

Are personal pensions safe?

Yes, without doubt, a personal pension is a safe option, however, it is always prudent to ensure that the provider you are considering is authorised and regulated by the Financial Conduct Authority. Also providers covered by the Financial Services Compensation Scheme will protect any assets held within your pension up to the value of £85,000.

Sadly the sheer value of pensions can make them an appealing target for fraudsters and pension scams. This is why it is always prudent to check your provider is authorised by the Financial Conduct Authority or the Pensions Regulator.

Do I need financial advice to open a pension?

No. Anyone can open and manage their own pension, and providers have now made pensions accessible to all walks of life. However, people with a high net worth or those who are already in possession of a substantial pension pot may benefit from the services of a regulated financial adviser.

It is also often beneficial to seek the services of a independent financial adviser or pensions adviser when it comes time to draw your pension, as they assist with your retirement planning needs.

Get a FREE Pension Review

Get a free no obligation pension review today from a qualified financial adviser.

Remember there are costs associated with financial advice and whether or not this is cost effective for you will depend solely on your unique circumstances.

Which is the best pension plan?

The holy grail of pensions is the workplace pension, as this attracts a contribution from your employer, as well as the government bonus. However, for people who are unemployed, this isn’t a viable option, in which case a private pension would be the best option.

Private pension providers FAQs

Can I access my pension tax-free?

When you reach retirement age you are able to withdraw money from your pension regardless of whether you have chosen to continue working or not and the first 25% of your pot will be tax-free. However, beyond that amount, you will be taxed in the same way as you are your income and once you have accessed your pension, your maximum contribution levels will fall to £4,000 per year in order to receive the tax benefits.
There are also charges associated with accessing your pension early.

Should I go for an annuity or drawdown?

When it comes time to access your pension there are a number of options available including an income drawdown plan whereby you keep some of your pension invested whilst drawing an income from it. Alternatively you can buy an annuity which will provide you with a guaranteed income for life. There is also the option of a combination of these two options. You can also choose to take lump sum payments from your pension pot. It is wise to check details such as the annual service fee at this point.

Which option is best for you will largely depend on your unique circumstances. A financial adviser can offer more guidance when it comes to drawing your pension.

When can I access my private pension?

You can access your private pension when you turn 55 at which time you can take 25% as a tax free lump sum.

What happens to my pension when I die?

You can bequeath your pension to your dependents in the event of your death. Should you fail to name a beneficiary, your pension will automatically be added to your estate.

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