Best Private Pensions Compared & Reviewed

When you invest in a private pension, an administrator is responsible for any payments into your pension. They will also reclaim basic rate tax relief and process any income withdrawals that you make.

SIPP providers such as Hargreaves Lansdown, AJ Bell and PensionBee administer pensions as part of the service. Other providers use third party administrators to manage this function on their behalf, for example Barclays SIPP uses AJ Bell.

Third-party administrators also usually take care of workplace pensions on behalf of employers.

All third-party administrators (and the administration of SIPP providers if done in-house) are regulated by the Financial Conduct Authority which expects firms to clearly establish roles and responsibilities and have procedures to ensure all employees are properly trained and competent.

If you have concerns or complaints about the way your pension is administered, you need to contact the Pensions Ombudsman.

Should the administrator fail completely your pension will be protected by the Financial Services Compensation Scheme.

Further reading: Can I change SIPP administrators?

Yes. If you feel that you are paying too much in fees to your current private pension provider, or they do not offer the flexibility and fund choices you need, it might be worth transferring. However, not all schemes accept transfers.

You can usually transfer a defined benefit pension to a new pension scheme at any time up to one year before the date of when you’re expected to start taking your pension. Some schemes will let you transfer only a part of your benefits. You’ll need to check with your provider to see if they offer this option.

If you are considering leaving your DB scheme, before you can start the advice process, you need to get a transfer value from your scheme. The transfer value is set for three months, so line up an adviser ahead of time to avoid having to make rushed decisions. If you don’t complete the transfer process within the three-month period for which the transfer value is guaranteed, you might have to apply for another value, which will likely incur a cost.

When you’ve transferred to a new scheme, you’ll usually have given up all benefits under the old scheme, and when you start taking your pension, you can’t usually move your pension elsewhere.

If you take regulated financial advice, the IFA bears the risk of any poor decisions rather than you.

Defined benefit scheme members must seek regulated independent financial advice before taking a transfer out if their pot is worth more than £30,000. Thousands of DB members have received bad advice, resulting in them losing their valuable DB pensions. The FCA says good advisers will ask you about current financial circumstances and aims; priorities and spending plans in retirement; other pensions, assets and debts; and your health and your family’s health.

As with DB members, if your DC scheme has ‘safeguarded benefits’ such as a guaranteed annuity rate, and the value of these benefits is more than £30,000, you’ll have to get regulated financial advice before you can transfer.

If you have small pension pots worth less than £10,000, consider keeping them where they are. This is because if you’re considering taking a small pot lump sum at some point before you retire, by withdrawing the whole amount, this will not affect any future pension contributions.

It is almost always better to remain in your occupational or workplace pension because you enjoy contributions from your employer. However, if you are in a defined benefit pension and approaching retirement, you will not be able to take the same flexibilities as those offered to DC members. You must seek financial advice before switching out of DB, and remember that you will be giving up protection of an income for life. Even if your employer is vulnerable to insolvency, your DB pension is protected by the Pension Protection Fund; something not extended to DC funds.

If you are a member of several workplace DC pensions, it might make sense to consolidate these in one place, since your scheme is not transferred automatically when you change jobs.

It may also make sense to transfer your pension to a specialist provider if you are moving overseas. Not all schemes can take contributions from abroad, so you need to fund a qualifying recognised overseas pension scheme.

Private pensions are flexible on death, which means you can nominate a recipient to receive your retirement income.

If you die before your 75th birthday and haven’t started drawing your pension, it can be passed to your beneficiaries tax-free. The beneficiaries will be able to choose how they draw the income (lump sum, drawdown or annuity).

If you die before your 75th birthday, and are already receiving your pension, it will impact how beneficiaries can access the pot. If you took a lump sum and you have remaining cash in your bank account outside of your pension, this will be counted as part of your estate. If you are using drawdown, your beneficiaries can access whatever’s left in your pension entirely tax-free.

If you die after your 75th birthday, your beneficiaries will pay income tax on any pensions you leave behind, at their marginal rate.

If you are not confinement that you fully understand private pensions then yes, you should talk to an independent financial advisor. The market for private pensions is huge, and with so much choice, finding the right plan can be confusing. It is worth considering taking independent advice to find the most appropriate pension for you.

However, there are plenty of well-known companies offering good value private pensions . These include Nutmeg, Wealthify and moneyfarm. Some will offer access to a wide range of ways to invest, while others will keep it more basic. Typically, these firms charge around 0.5% of your pot to run the plan. They offer access to tracker funds which deliver returns in line with how the main indexes are performing your contributions are spread across bonds, stocks, commodities and property. They will also diversify across geographies providing access to global markets.

You can also invest into a self-invested personal pension (SIPP), which allows you to choose exactly how your money is invested.

Yes, you can invest in a private pension and a Lifetime ISA (LISA) simultaneously.

Individuals aged over 18 and under 40 can consider opening a LISA, which is a savings account designed solely to buy a first home or to provide a retirement income.

LISAs are tax-advantaged, so you won’t pay tax, capital gains, or dividend tax on money you take out, but contributions are made after income tax, and they are subject to inheritance tax.

LISAs are also restricted to a maximum £4,000 a year contribution limit, which goes towards the £20,000 ISA contribution cap. You can only withdraw once you reach 60 or if the money is to purchase a first property. Unauthorised withdrawals are subject to a 20% charge.

Further reading: Compare the best lifetime ISAs here

The State pension is paid by the Government to all those with at least 10 years of National Insurance Contributions. A private pension is entirely separate from the State pension and consists of contributions you have made.

To receive the maximum State pension amount – currently £179.60 per week (2021/22) or £9,339.20 per year, you need to have 35 ‘qualifying’ years.

Couples entitled to the full state pension receive a maximum of £359.20 per week or £18,678.40 per year as of 2021/22.

Given the relatively low level of income from the State pension, those who also save into a private pension will most likely be far better off. In addition, you can draw from your private pension from age 55, but the State pension is only available from age 66 (rising to 67 from 2028). There is also a lot of flexibility available with private pensions, giving you the chance to grow your money (however, investments can fall as well as rise).