Personal pensions

Overview

Personal pensions are pensions that you arrange yourself. They’re sometimes known as defined contribution or ‘money purchase’ pensions. You’ll usually get a pension that’s based on how much was paid in.

Some employers offer personal pensions as workplace pensions.

The money you pay into a personal pension is put into investments (such as shares) by the pension provider.  The money you’ll get from a personal pension usually depends on:

how much has been paid in

how the fund’s investments have performed - they can go up or down

how you decide to take your money

Types of personal pension

There are different types of personal pension. They include:

stakeholder pensions - these must meet specific government requirements, for example limits on charges

self-invested personal pensions (SIPPs) - these allow you to control the specific investments that make up your pension fund

You should check that your provider is registered with the Financial Conduct Authority (FCA), or the Pensions Regulator if it’s a stakeholder pension.

Paying into a personal pension

You can either make regular or individual lump sum payments to a pension provider. They will send you annual statements, telling you how much your fund is worth.

You usually get tax relief on money you pay into a pension. Check with your provider that your pension scheme is registered with HM Revenue and Customs (HMRC) - if it’s not registered, you won’t get tax relief.

Choosing a personal pension

Citizens Advice has information about choosing a personal pension.

Independent financial advice

You can find an independent financial adviser:

from Unbiased

from the Personal Finance Society

You’ll usually have to pay for this advice (Independent financial advice).

How you can take your pension

Most personal pensions set an age when you can start taking money from them. It’s not normally before 55. Contact your pension provider (your provider) if you’re not sure when you can take your pension.

You can take up to 25% of the money built up in your pension as a tax-free lump sum. You’ll then have 6 months to start taking the remaining 75%, which you’ll usually pay tax on.

The options you have for taking the rest of your pension pot include:

taking all or some of it (the rest of your pension pot) as cash

buying a product that gives give you a guaranteed income (sometimes known as an ‘annuity’) for life

investing it (your pension) to get a regular, adjustable income (sometimes known as ‘flexi-access drawdown’)

Ask your pension provider (your provider) which options they (your provider) offer (they (your provider) may not offer all of them). If you don’t want to take any of their (your provider) options, you can transfer your pension pot to a different provider.

Taxes and charges

Your pension provider (your provider) will take off any tax you owe before you get money from your pension pot.

You might have to pay a higher rate of tax if you take large amounts from your pension pot (your pension). You could also owe extra tax at the end of the tax year.

Your pension provider (your provider) might charge you for withdrawing cash from your pension pot (your pension) - check with them (your provider) about this.

Get regular payments from an annuity

You might be able to buy an annuity from an insurance company that gives you regular payments for life. You can ask your pension provider (your provider) to pay for it out of your pension pot.

The amount you get can vary. It depends on how long the insurance company (an insurance company that gives you regular payments for life) expects you to live and how many years they (an insurance company that gives you regular payments for life)’ll have to pay you. When they (an insurance company that gives you regular payments for life) calculate the amount they (an insurance company that gives you regular payments for life) should take into account:

your age and gender

the size of your pension pot

interest rates

your health (sometimes)

There are different kinds of annuities. Some are for a fixed time (for example, payments for 10 years instead of your lifetime) and some continue paying your spouse or partner after you die.

You don’t have to buy your annuity from your pension provider (your provider).

Invest the money in a drawdown fund

You may be able to ask your pension provider (your provider) to invest your pension pot in a flexi-access drawdown fund.

From a flexi-access drawdown fund you can:

make withdrawals

buy a short-term annuity - this will give you regular payments for up to 5 years

pay in - but you’ll pay tax on contributions over £4,000 a year

Keeping your capped drawdown fund

If you have a ‘capped drawdown’ fund and want to keep it, your money will stay invested.

You can keep withdrawing and paying in. Your pension provider (your provider) sets a maximum amount you can take out every year. This limit will be reviewed every 3 years until you turn 75, then every year after that.

Withdraw cash from your pension pot

You may be able to take cash directly from your pension pot. You could:

withdraw your whole pension pot

withdraw smaller cash sums

When you can’t withdraw cash

You can’t take smaller cash sums if any of the following apply:

you’ve already saved £1,073,100 in pension schemes over your lifetime (your lifetime allowance)

you have some type of lifetime allowance protection

you’re under 75, and the sums you want to withdraw are bigger than the amount of lifetime allowance you have left

Get help

Contact your pension provider first if you need help with a personal pension.

If they (your pension provider) can’t help, you can get free and impartial information from The Pensions Advisory Service (they don’t provide financial advice).

Financial advice

You can find a financial adviser if you want advice. You’ll usually have to pay for their services.

If you’re over 50

Pension Wise has information about your pension options. If you’re over 50 you can book a free appointment to talk about your options. Pension Wise doesn’t cover the State Pension, ‘final salary’ or ‘career average’ pensions.

State Pension

For help with your State Pension contact the Pension Service.

Complaints

If you have a complaint about how your pension scheme is run, talk to your pension provider first. They have to respond within 8 weeks.

You can also contact the Pensions Ombudsman if you’re concerned about how a pension scheme is run.

Complain about marketing

You can get help from the Pensions Advisory Service or complain to the Financial Ombudsman’s Service about how a pension scheme has been marketed to you.

If your provider has broken the law

If you think your pension provider has broken the law, you can complain to:

the Pensions Regulator for workplace pensions

If your provider goes bust

If the pension provider (your provider) was authorised by the Financial Conduct Authority (the Financial Conduct Authority for personal and stakeholder pensions) and can’t pay, you might get compensation from the Financial Services Compensation Scheme (FSCS).


Changing an employment contract

Getting agreement

Usually, the employer and employee both need to agree to any contract changes. But an employee can insist on a change if they have a legal right to it.

Employers

You must get an employee’s agreement if you want to make changes to their contract.

You should:

consult or negotiate with employees or their representatives (for example from a trade union or staff association)

explain the reasons for changes

listen to alternative ideas from employees

You may also want to talk with workers, asking them about their future plans. With older employees this can include talking about their thoughts on retirement and their options for staying in the job, for example changes to their role, hours or working pattern.

Employees

Explain to your employer why you want to make the changes. You can insist on a change if it’s covered by a statutory right - for example not working on a Sunday.

Making changes

Once employers have agreed on changes with their staff, they need to:

update the terms of their (employers) employees’ ‘written statement’ of employment conditions

write to their (employers) employees within a month to tell them (workers) exactly what has changed

If an employer changes terms and conditions that are not in the written statement (their (employers) employees’ ‘written statement’ of employment conditions) (for example the right to sick leave), they (employers) should tell their (employers) employees where to find information about the change. This could be in a company handbook, noticeboard or intranet site.

Collective agreements

Employers must write to their staff to let them know about any changes to collective agreements with trade unions or staff associations.

These changes might affect the terms of employees’ written statements, including pay and working hours, whether or not they (their staff)’re a member of the union or staff association.

Flexibility clauses

Flexibility clauses are terms in a contract that give employers the right to change some conditions of employment, for example relocation.

Employers can only use flexibility clauses to make reasonable changes.

Changes of employer

If someone starts working for a different employer, they’ll normally have to be given a new written statement within 2 months.

However, if the name of a business changes or there’s a new employer but no other changes in terms and conditions, the employer does not need to issue a new written statement. They still need to write to their staff about the changes within a month.

Disciplinary measures

Sometimes changes to an employee’s terms and conditions, like a demotion, can happen as a result of a disciplinary measure.

Employers should make sure the staff handbook or intranet site contains information about how this (Disciplinary measures) could happen in the section dealing with disciplinary procedures.

Dealing with problems

Problems can arise if:

an employer tries to change a contract without agreement, or re-employs someone on new terms and conditions

there is a breach of contract where one of the terms in a contract is broken (for example an employer does not pay agreed wages or employees do not work agreed hours)

Solving disputes

Employers and their staff should try to solve disputes about contract changes by talking informally or through mediation.

Employees can also get advice from their trade union representative (if they’re a member of a union), Citizen’s Advice or Acas (Advisory, Conciliation and Arbitration Service). In Northern Ireland, they can get advice from the Labour Relations Agency (LRA) .

If the problem cannot be solved, employers or employees may have the right to take legal action. It’s important to get advice first because legal action can be expensive. Trade union members may be able to get legal advice from their union.

Making a change without agreement

If an employer makes a change to a contract without getting agreement (including by using flexibility clauses unreasonably), employees may:

have the right to refuse to work under the new conditions

say that they (employees)’re working any new terms under protest, and are treating the change (change) as a breach of contract

resign and claim constructive dismissal

be able to take a case to an employment tribunal

In Northern Ireland an employment tribunal is known as an ‘industrial tribunal’.

If an employee disagrees with new terms and conditions but does not say or do anything, this may count as agreeing to the changes.

Re-employment on new terms and conditions

Employers may, as a last resort, end a contract and re-employ someone on new terms and conditions.

Employers who are dismissing employees must follow the legally required:

redundancy procedure in England, Wales and Scotland

statutory minimum dismissal in Northern Ireland

If an employer does dismiss and re-employ someone, they may be able to take a case to a tribunal and claim:

breach of contract

unfair dismissal

Breach of contract claims

If an employee claims breach of contract and they cannot solve things informally with their employer, they may be able to take their case to a civil court or an employment tribunal (or an industrial tribunal in Northern Ireland).

Their (an employee) employer may be able to make a counter-claim.

Claims and counter-claims can only go to a tribunal if they:

are related to an employment contract issue

still have not been solved when the employee ends their employment

The claim or counter-claim (Claims and counter-claims) cannot be related to a personal injury, or certain types of contract term like intellectual property rights.

Time limits

Usually, employees must make a claim to a tribunal within 3 months of ending their employment. The employer gets 6 weeks from receiving a copy of the claim to decide whether to make a counter-claim.

Compensation limits

If the tribunal (a tribunal) agrees with the employee’s (employees) claim (a claim), they (a tribunal) may award compensation. This can only be for financial loss (for example, non-payment of wages) up to a maximum of £25,000.


Joining a trade union

Joining a trade union

A trade union is an organisation with members who are usually workers or employees. It looks after their interests at work by doing things like:

negotiating agreements with employers on pay and conditions

discussing big changes like large scale redundancy

discussing members’ concerns with employers

going with members to disciplinary and grievance meetings

Find a union to join

If there’s a union at work, you can ask the trade union representative (‘rep’) about joining. Their contact details may be in your company handbook, intranet site or on the union noticeboard.

The union rep (the trade union representative (‘rep’)) will tell you if you’re eligible to join and give you a membership form to fill in.

Trade union contact details

You can search a list of unions and their contact details put together by the Certification Officer, the independent organisation responsible for the legal regulation of unions.

You can also use the TUC’s interactive tool to help you find a trade union in your workplace, or one which covers your type of job.

Trade union membership subscriptions

Your union will charge a union membership fee (‘membership sub’) to finance the work of the union. This can be the same amount for all employees or based on how much you’re paid.

Paying your membership subs (Trade union membership subscriptions)

You can pay your subs (Trade union membership subscriptions) by:

having the amount taken by your employer from your pay and sent to the union (Your union) (otherwise known as ‘check-off’)

direct debit

cash

cheque

Paying by check-off

Your employer does not have to take union membership subs from your pay and send it to the union (Your union). They (your employer) can stop sending your membership subs unless your employment contract says they (your employer) have to.

Your employer cannot take union membership subs from your pay without your written permission. Many trade unions will get your agreement to pay by check-off when you join, and forward it to your employer.

You can also ask your employer in writing to stop taking money from your pay for check-off whenever you want. They (your employer) must then stop taking subs from your pay as soon as it’s possible.

Your employer is responsible for making sure that any check-off payments they (your employer) make are legal.

What to do if you have a problem

If you have a problem with your check-off payments, try to discuss the issue with your employer and your trade union (Your union) first.

If your trade union subscriptions are taken from your pay without your consent, you could make a complaint to an employment tribunal against your employer.

If your complaint is successful the employment tribunal (an employment tribunal) can order your employer to pay you the value of the unauthorised payments.

Trade union membership: your employment rights

You have the right to:

choose to join or not join a union

decide to leave or remain a member of a union

belong to the union you choose, even if it’s not the one your employer negotiates with on pay, terms and conditions

belong to more than one union

Your employer is not allowed to:

offer you a benefit to leave a trade union

threaten to treat you unfairly if you do not leave a union

Refusing to employ you for trade union membership reasons

An employer or employment agency is not allowed to insist that you:

join or leave a trade union

leave one union for another

Dismissal for trade union membership reasons

Your employer is not allowed to dismiss you or choose you for redundancy because you:

are or want to be a union member

are not or do not want to be a union member

took part or wanted to take part in union activities

Other unfavourable treatment

Your employer must not treat you unfavourably (for example refusing you promotion or training opportunities) if you:

join a union

take part in its (a union) meetings

leave a union

What to do if you have a problem

You may be able to use a grievance procedure or go to an employment tribunal  if you think your employer has treated you unfairly because of your trade union membership.

Contact the Advisory, Conciliation and Arbitration Service (Acas) if you have any questions about trade union membership.

Role of your trade union rep

A trade union representative (‘rep’) is a union member who represents and gives advice to colleagues when they have problems at work.

Trade union reps are not paid but they do get paid time off to do their work as a rep.

What do union reps do?

Reps are there to:

discuss any concerns you have about your employer

go with (‘accompany’) you to disciplinary or grievance hearings with management

represent you in negotiations (‘collective bargaining’) over your pay and terms and conditions of employment

meet with your employer to find solutions to workplace issues

develop the best possible health and safety procedures with your employer

Employers must consult with union reps if:

there is going to be a business transfer or takeover

they (Employers) are planning to make 20 or more people redundant within 90 days

Your right to be accompanied

You have the right to be accompanied by your union rep to some meetings with management - for example, if:

you’re facing a disciplinary charge

you wish to raise a grievance with your employer

If your union rep cannot attend, you may be able to rearrange the meeting or ask a work colleague to go with you.

Becoming a union rep

If you want to become a union rep, ask another rep in the workplace or contact your union through its website. Depending on union rules, you may be appointed or elected.

If you become a union rep, find out what rights you have.

Union negotiations with your employer

When an employer and a union agree to negotiate on pay, terms and conditions, this agreement is called ‘recognition’ of the union. The negotiations are called ‘collective bargaining’.

How collective bargaining works

Your employer and trade union must agree on how collective bargaining will be done including:

which union, rep or official will represent a group of workers or employees (this group is called a ‘bargaining unit’)

who is included in the bargaining unit

how often meetings will take place

what issues they’ll discuss

how disagreements will be handled

how collective bargaining will work if more than one union is recognised

Collective agreements

Agreements reached through collective bargaining are called collective agreements and they often mean a change in your employment terms and conditions.

Collective agreements can cover all staff - not just union members.

Your employment contract may say which collective agreements cover you if:

your employer recognises more than one trade union

1 union is recognised to negotiate for more than 1 bargaining unit