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How to Start a Pension

My step by step guide on how to start a pension will help you make the best decisions for your current circumstances so you can effectively plan for your retirement.

How to Start a Pension if You Have Just Started Your First Job

It is compulsory for your employer to enrol eligible employees into a workplace pension scheme, so if you have just started your first job, check the criteria below to identify whether you qualify for a workplace pension.

Eligibility Criteria

  • You must be in employment
  • You must be over 22 years of age
  • You must earn over £10,000 a year

Benefits of a Workplace Pension

  • Tax relief on contributions to your pension
  • Ability to withdraw a 25% tax-free lump sum when you retire
  • Effective inheritance tax (IHT) planning (speak to your financial adviser)
  • Investments that are allowed to grow within a tax-efficient fund
  • Additional contributions from your employer of at least 3% of your salary

How to Enrol in a Workplace Pension

  1. Contact your HR department or employer for details of their pension provider.
  2. Ensure you have been auto-enrolled on the pension scheme
  3. Select the maximum monthly pension contributions you can afford

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Top Pension Providers in the UK

Rank Pension Provider Description Link
1 Interactive Investor Interactive Investor is running a SIPP promotion where you don’t pay any fees for 6 months Open a SIPP
2 Hargreaves Lansdown Hargreaves Lansdown is a leading UK SIPP Provider for UK investors Open a SIPP
3 Fidelity Investments The SIPP from Fidelity is an easy way to start your pension as you can start with as little as just £50 per month, or with a lump sum of £1,000. The Fidelity typical service fee is a low-cost 0.35% plus ongoing charges. Open a SIPP
4 Pensionbee Pensionbee specialises in combining your existing pension schemes into one pension which you can then manage and contribute too in an easy to use interface. They offer a fantastic service for anyone who has accumulated different work pension schemes over a career. Please note you need to move at least one existing pension in order to use the service Transfer your Pension
5 Nutmeg A Personal Pension investment platform that marries the shiny new robo advisor platform with the trappings of a more traditional stockbroker. For new accounts, Nutmeg is offering 6 months 0% Portfolio Management Fees Open a Personal Pension
6 Saxo Markets Excellent, user friendly trading platform and extensive product portfolio
Visit Site
7 IG Investments Multiple options for funding and withdrawing money and great educational tools Visit Site
8 AJ Bell Youinvest One of the cheapest options for small and medium portfolios with an easy to use platform phone, ipad and laptop Visit Site
9 Freetrade SIPP With its recently launched SIPP, Freetrade is a great option for robo-advisor style, simple pensions Visit Site
10 Penfold Specifically aimed at self-employed people looking to start a new pension Visit Site
11 Moneyfarm Moneyfarm offer an easy to set up SIPP and you can transfer your pension to them too Visit Site
12 Moneybox You can track down your old workplace pension pots and combine them into one simple Moneybox Personal Pension Visit Site

How to Start a Pension if You Have Had Several Jobs

Due to auto-enrolment, if you have had several jobs, it is possible that you already have several pensions. It makes good financial sense to consolidate any pensions you have into one fund.

Benefits of consolidating existing pensions

  • Increased efficiency in tracking and managing pensions
  • Potentially lower provider costs
  • Maximise earnings made from investments

How to Consolidate Existing Pensions

  1. Locate any existing pensions at Find pension contact details
  2. Consolidate into your current workplace pension
  3. Maximise your monthly pension contributions to enjoy the most benefits

If you are currently self-employed, read on to discover how to consolidate your existing pensions into a personal pension.

How to Start A Pension If You Are Self-Employed

For self employed people, the onus is on you to organise and manage your own pension. There is no access to a workplace pension and you will therefore have to choose a personal pension to save into. Find out which is the best pension for the self-employed in our dedicated guide.

Benefits of a Personal Pension

  • Tax relief on contributions to your pension
  • Ability to withdraw a 25% tax-free lump sum when you retire
  • Effective inheritance tax (IHT) planning (speak to your financial adviser)
  • Investments that are allowed to grow within a tax-efficient fund
  • Complete flexibility on pension contributions
  • Flexibility on investments

How to Start a Personal Pension

You will need to consider your investment experience. A knowledgeable investor will no doubt want to pick their own investments and will therefore require a provider that can facilitate this.

Novice investors may want to consider a personal pension provider who can match you with a ready-made fund that is professionally managed and within your risk profile or alternatively provide you with investment advice.

  1. Identify if you are an experienced or novice investor and you attitude to risk
  2. Select a pension provider
  3. Register an account using your national insurance number
  4. Consolidate any existing pensions into your new pension (a provider like PensionBee or Penfold will do this for you)
  5. Set up regular, or one off contributions
  6. Manage your investments

The Three Types of Personal Pension

1. Basic Personal Pensions – regular monthly contributions are paid into a range of investments.

2. Stakeholder Pensions – low or flexible contributions, default investment strategies and capped charges.

3. SIPPs (Self-Invested Personal Pensions) – maximum control over contributions and investments, flexible, portable, low cost option that allows you to combine your pension pots into one single fund.

Best Personal Pension Providers for Experienced Investors

Provider Account Fee Buying and selling shares FX rate Transfer out fee Trustpilot Score 
Freetrade SIPP £9.99 pcm FREE Spot rate +0.45% FREE 3.9/5
Interactive Investor SIPP £19.99 pcm £7.99 1 free trade pcm Spot rate + 1.5% FREE 4.6/5
AJ Bell SIPP 0.25% £9.95 Spot rate + 1% £9.95 4/5

Best Personal Pension Providers for Ready-Made Funds

Provider Platform Fee Fund Cost Transfer Out Trustpilot Score
PensionBee SIPP 0.5% – 0.95% 0.03% transaction cost FREE 4.7/5
Penfold SIPP 0.75% FREE FREE 4.7/5
Moneybox SIPP 0.45% 0.13% – 0.25% fund provider cost FREE 4.2/5

All these providers are authorised and regulated by the Financial Conduct Authority.

Pension Need-to-Knows

  • State pension age is 66 and a personal pension can not be accessed before the age of 55.
  • A basic rate taxpayer will enjoy a 20% tax relief on any pension contributions you or your employer make.
  • Additional rate taxpayers get 45% tax relief added to their pension money.
  • Income tax relief is available on 100% of your income but not on any contributions made over this amount.
  • The annual limit is currently £40,000. However, any unused allowance from the previous 3 years can be rolled over.
  • There is also a lifetime limit of £1,078,900.

How to Start a Pension FAQs

 

How Much Will I Need To Save Into My Pension Pot?

The general rule of thumb when starting a pension is you should half your current age and this number represents the percentage of your salary that you should be saving into your pension.

What Will I Get From the State Pension?

You will get £176.60 a week when you reach retirement age, which is why it’s so important that you also save into a workplace or personal pension.

Do You Need A Financial Adviser When Starting a Pension?

The need for a financial adviser very much depends on your personal circumstances. If your requirements are quite straight forward then it is easy enough to select your own pension scheme. However, for more complex finances, financial advice can be more than worth the money you pay and good advice can help you ensure your pension plan will provide adequate savings for your retirement. Financial advice can also help put a profitable investment strategy in place.

At What Age Can You Start a Pension in the UK?

A pension can be started at any age. There are Junior SIPPs available should you want to start saving for your children’s retirement.

Why Start Your Pension Early?

The sooner you get started, the longer you will have to save an adequate pension income and the longer your investments will have to grow.

Is it Ever Too Late to Start Your Pension?

It is never too late to start saving for your retirement income, however, the later you leave it, the more you will need to contribute to your pension fund in order to save an adequate amount.

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