How your pension works

How money goes in

When you join a workplace personal pension, you're not the only one putting money into your pension pot. You will receive tax relief from the government and your employer may contribute too.

The way it works is simple. Some of the money you earn goes into your pension pot each month. On top of that:

You get tax relief: The government wants you to save for retirement. So up to certain limits, you will receive tax relief on the money you put in your pension pot. This means, if you're a basic rate taxpayer. For every 80p you pay into your pension pot, tax relief means a total of £1 is paid in to your pension pot.

You might get contributions from your employer: Your employer may put money into your pension pot too - the amount varies from scheme to scheme. Speak to your employer to find out how much they'll contribute.

The value of the tax benefits will depend on your individual circumstances and tax laws could change in the future.

What we do with your money

Money goes into your pension pot, ready for you to use when you retire. Until then it's our job to look after it for you.

Until it's time for you to use it, the money in your pension pot is invested in funds.

Some people want to choose their own funds. Some people will want a bit of help. But others want us to do it for them. That's why we give you the choice:

You can choose your own funds
We have a range of different funds to choose from. You should choose funds depending on things like your age, the date you expect to retire, and the amount of risk you're prepared to take with your money at this time. You might want to take financial advice before choosing your funds.

Or you can put your money in a default fund
If you don't feel confident enough to choose which funds to invest in, you can invest in the default fund your employer has selected. In a default fund, your money is automatically invested in funds that your employer and adviser have chosen for you.

To find out more about our different funds, go to Our range of funds.

How you can use your money

Different people will want to use their pension pot in different ways. There are lots of things you can do with your money.

Most pension schemes let you use the money in your pension pot when you reach 55. Some people might want to retire at this point, or go part-time - others will want to carry on working and keep paying into their pension. Whatever you do, the government won't normally let you use the money before you're 55.

When you do use your pension pot, you'll need to think about:

• Taking a tax-free lump sum: If you want to, you can take up to 25% of your pension savings as a tax-free lump sum subject to certain limits, to use however you like. You might do this if you want to celebrate your retirement with a holiday. You might even want to start another investment.
• Getting an income: The government wants to make sure that your pension pot will last for your whole retirement. That's why you can only take up to 25% as a tax free lump sum. You can use the rest of the money to give you an income, which can support you when you decide to retire or reduce your working hours.

You don't need to decide how you'll use your pension pot until you're getting ready to retire. As you get closer to retirement, you'll be sent some information explaining how you can use your pension pot to give yourself a regular income.

The value of the tax benefits will depend on your individual circumstances and tax laws could change in the future.

How to join

Whether you are currently a member of a pension scheme or not, it's really easy to join. Your employer can tell you where you can get more details and application forms.