Glossary · UK
What is Personal Pension?
A defined contribution pension arranged individually with a provider, rather than through an employer, that anyone (employed, self-employed or not working) can pay into and receives tax relief on.
Full Definition
A personal pension is a defined contribution pension contract that an individual arranges directly with a pension provider, rather than through an employer scheme, and can be opened by anyone -- employees who want an additional pension alongside their workplace scheme, the self-employed who have no employer to auto-enrol them, or someone not currently working who wants to keep saving toward retirement. Contributions attract tax relief at the saver's marginal rate: a basic-rate taxpayer paying GBP 80 net has it grossed up to GBP 100 automatically by the provider, with higher and additional-rate taxpayers able to reclaim the further relief due through Self Assessment. Non-earners and low earners can still contribute up to GBP 3,600 gross a year (GBP 2,880 net after basic-rate relief is added) and still receive the tax top-up even without matching earnings, making personal pensions useful for topping up a partner's or grandchild's retirement savings. The Self-Invested Personal Pension (SIPP) and Stakeholder Pension are both specific types of personal pension, offering wider investment choice or lower minimum contributions and capped charges respectively, but the core "personal pension" label covers any individual defined contribution contract subject to the same Annual Allowance of GBP 60,000 (2026/27), the same pension freedoms from age 55 (rising to 57 from April 2028), and the same tax treatment on withdrawal as other money purchase pensions.