Private pensions are retirement savings plans that savers set up, and contribute to, by themselves. They are one of the most popular ways of securing a comfortable life in retirement, and most financial institutions offer some kind of private pension scheme.
The UK market is overly saturated, and many inexperienced investors have a hard time finding the right private pension for their circumstances – but we are here to help.
The UK's Best Pensions Providers – Reviewed
Below we list the best pension providers and a brief explanation of what makes them ideal for the specific type of saver.
Best all-around – Vanguard
Best for ease of use – PensionBee
Best robo advice platform – Nutmeg
Best for self-employed savers – Penfold
Best for beginner investors – Moneybox
Best value for money – Bestinvest
While it doesn’t offer the flexibility of a self-invested personal pension (SIPP), Vanguard’s personal pension plan is the next best thing. In addition to the numerous ready-made portfolios, it gives savers who want to take control plenty of options to build their own portfolios, making it suitable for both beginners and experienced investors.
Moreover, Vanguard is one of the cheapest private pension options. It has a reasonable platform and transaction costs and doesn’t charge any extra drawdown or exit fees.
Of course, it’s not perfect, and it lacks some features and tools mostly used by short-term investors. However, it’s the best choice for long-term savers who only want to save for retirement.
- One of the most cost-effective platforms in the market
- No drawdown or exit fees
- Solid range of portfolios, funds, and other investment options
- Financial advisor services available
- Demanding minimum investment requirements
- The mobile app is slightly outdated
- Not the widest range of features
- Employers can’t make contributions
With a relatively low maintenance fee and absolutely no fees for withdrawing, combining, contributing to, and transferring pensions, PensionBee is an ideal choice for savers who are looking to consolidate existing pensions from previous employers at no initial cost.
Using the PensionBee app is easy and transparent. Savers can use visual tools to check their pension pots and compare plans and their prices and benefits without any complication.
While the choice of only nine funds is significantly lower than what the competition is offering, this can be seen as an advantage for savers who are looking for the simplest pension option.
- Low cost
- Straightforward and easy to understand
- Easy to manage and consolidate pensions
- No drawdown fees
- All investment options are limited to one fund
- Doesn’t offer any financial advice
- Doesn’t work for public service pensions
- Doesn’t allow transferring pensions from abroad
Savers who are too busy to bother with every small detail of their pensions are looking for set-and-forget solutions, and Nutmeg offers exactly that.
As a robo advisor, Nutmeg can help novice investors set up a portfolio of their linking. In addition to the four investment options, savers can set their risk levels on a scale from one to ten and let the platform take care of everything else.
While it’s not the most cost-efficient platform on our list, it’s still significantly less expensive than hiring an independent financial adviser.
- Automated investment management
- Beginner friendly and easy to set up and use
- Relatively inexpensive compared to other robo-advice platforms
- Offers flexible drawdown
- Demanding minimum investment requirements
- No individual funds
- Lacking some advanced features
- No relief for very large retirement pots
Penfold is another option that focuses on simplicity and ease of use. It’s great for savers who just need a safe retirement pot and don’t care too much about investment options. Automatically, this makes it less than ideal for experienced investors looking for more complex features.
It allows free pension consolidation and gives savers the ability to increase, decrease, or pause contributions, which will be particularly appreciated by self-employed savers whose incomes fluctuate. The only caveat is that with so much flexibility, they may end up saving less than necessary.
- Low cost
- No additional charges
- Easy to use and quick to set up
- Allow you to increase, decrease, or even stop contributions when you want
- Limited investment options
- Doesn’t provide financial advice for more complex financial planning
- Doesn’t have the widest range of tools and calculators
- The contribution flexibility may lead savers to insufficient retirement pots
While PensionBee and Penfold are both great choices for savers looking for uncomplicated and ready-made pension plans, Moneybox allows a more hands-on approach. It’s the perfect pension provider for inexperienced investors who want to explore their options and get started with the world of investing.
Moneybox is 100% digital, and in addition to private pensions, its product range includes other services like general investment accounts, stocks and shares ISAs, etc. The Moneybox mobile app ties everything together and educates users on how to start taking control of their portfolio allocations and take their investing one step further.
- Great mobile app
- Wide range of features
- Useful tools and calculators
- Round-up feature that automatically adds change to your savings
- Fees can become a bit costly
- Doesn’t offer a drawdown feature
- Doesn’t accept employer contributions
- Not the widest range of investment and trading options
Bestinvest may not be our best overall pick for a private pension, but when we consider all the benefits the platform offers for its minimal maintenance fees, it sure makes a strong case.
Savers who choose Bestivest will get access to a large number of ready-made portfolios, as well as individual funds and additional investing options. Granted, it’s not the most affordable option for trading international shares, but it’s definitely worth considering.
Moreover, Bestinvest takes research very seriously and does a great job at helping its clients choose the right investments for their portfolios.
- Very low platform fees
- Great range of portfolios, funds, and other investment options
- Easy-to-use research tools and calculators
- Free coaching and plenty of insights and tips
- Fixed fees on share dealing
- No Lifetime ISA
- Complaints about its customer service being slow to react
- No cap on platform fees for shares
How Do We Rate & Review Providers
The UK private pension market is quite competitive, with a range of providers offering a variety of products and services. As a result, choosing the right private pension provider can be overwhelming, especially for people unfamiliar with personal pension schemes.
Which is why we did the legwork and went over the offerings of the most popular financial institutions in the country, and created our list of recommendations based on the following criteria:
Regulation – All the pension providers in our reviews and comparisons face the necessary regulatory oversight that ensures their customers are protected and treated fairly and responsibly.
Investment Options – We primarily focused on the quality and quantity of ready-made pension plans offered but also appreciated providers that give experienced investors additional options to customise their portfolios.
Fees and Charges – In addition to the platform fee, we checked for other potential fees that savers may incur, as well as the transparency with which providers disclose them.
Performance Track Record – Great investment options and minimal charges are positive signs but don’t necessarily guarantee high returns if the provider doesn’t have a successful track record to back it up, so we paid attention to that as well.
Customer Experience – This includes everything from the quality of the provider’s mobile app and its user-friendliness to customer support and how easy it would be for a beginner to start an account and learn how to invest.
If you are just getting started with private pensions, we also recommend you check out the rest of the article. We will dive deeper into the different types of pension plans, as well as other important information such as taxation, costs, accessibility, and safety.
Workings of Private Pensions
Private pensions are retirement plans that are not provided by the state and exist with the goal of allowing individuals to save money for retirement outside of the state pension system. In addition to most banks, other financial institutions, such as insurance companies and investment firms, also offer private pension plans.
Here’s a brief explanation of how private pension plans work:
Contributions – Savers make regular monetary contributions towards their private pensions either through salary deductions, for employer-provided pensions or through personal contributions, for individual plans.
Investments – Their contributions are then invested into a range of assets, such as funds, bonds, and property, to generate returns and grow the value of the pension fund. These investments are generally low risk and low rewards and have the goal of protecting the saver from inflation rather than growing their wealth.
Fees – Besides making their contributions, savers have to pay certain fees, most commonly a platform fee, management fee, investment fund fee, etc., to the financial institution managing their pension.
Retirement – When the saver reaches a certain age, they can access the money in their private pension. Depending on the type of pension plan, they can either purchase an annuity and receive their pension savings as a guaranteed income for life, take out a lump sum, or choose a flexible income drawdown plan.
Private pensions are not the only way to create a financially stable retirement, but they are arguably the most important element of securing a comfortable life in old age.
Pensions offer a number of tax benefits, both in terms of contributions and retirement benefits.
Contributions made to private pension plans are subject to tax relief. For every £1 the saver adds to their pension fund, based on their marginal rate of income tax, the government adds an extra 20%, 40%, or 45%.
Pensions provide tax-free growth on the investment earnings within the pension fund.
When the saver decides to withdraw their retirement savings, the first 25% of the pension pot is the tax-free lump sum, while they have to pay tax on the remaining 75% based on the individual's marginal rate.
However, please note that there are annual and lifetime allowances on pension contributions which means that the amount that can be held within a pension fund is limited.
These allowances are subject to change and depend on the individual's circumstances.
Savings Accounts vs Private Pensions
Unlike savings accounts, which are designed to help savers achieve short-term saving goals, pensions have the purpose of providing savers with income in their retirement. Savers make many regular contributions to their private pension plan over a long time, and during the course of their retirement, they have their pension benefits gradually paid out to them.
Moreover, the contributions made to a pension plan are tax-deductible, meaning they reduce the individual's taxable income, which is not the case with savings accounts.
Investing vs Private Pensions
While private pensions can certainly be considered investments in one’s future, and there is a degree of market investing involved in pension plans, contributing to a pension and buying shares in the stock market are ultimately different investments.
Pension plans are low-risk and focus on achieving financial independence in retirement, while investing in the stock, bond, or real estate market are riskier endeavours primarily utilised to grow wealth.
Additionally, private pension savers can opt for a ready-made portfolio and leave the decision-making process to the experts in the financial institution taking care of their pension plan.
Please note that some pension providers offer self-invested private pension plans (SIPPs) where savers have more control over their investments and can choose where their money should be invested.
Personal Pension Plan
A personal pension plan is a retirement plan that relies on individuals saving for retirement on their own, rather than through contributions from their employer.
This type of private pension is commonly used by self-employed workers, freelancers, entrepreneurs, and other individuals who don’t have access to an employer-sponsored pension plan. The main difference between a PPP and other types of private pensions is in the level of flexibility and control that they offer.
Up to a limit, users of a PPP can choose how much and how often they want to contribute, as well as when and how they want to start receiving their retirement income. With PPP, savers who prefer a more hands-on approach can choose where to invest their money, but those who would rather leave it to the professionals can choose a ready-made plan.
What is a ready-made personal pension?
Self-Invested Personal Pension (SIPP)
Self-invested personal pension plans, commonly known as SIPPs, are the type of private pension that allows the saver the most control over investment decisions.
They are generally used by experienced investors who believe that they have the expertise to make the right investment decisions and make the most of their savings. SIPP account holders use their savings to invest in stocks, bonds, and mutual markets and take higher risks to potentially earn higher returns on their investments.
Among the private pension types, SIPPs are the costliest option. Besides the annual management fee paid with every private pension, SIPP charges include paying trading fees for the buying and selling of shares. They are generally charged per transaction and can significantly increase the overall cost.
Stakeholder Pension
Stakeholder pension is a low-cost pension type designed with the specific purpose of allowing individuals with no access to a workplace pension scheme to save for retirement.
While it’s similar to the personal pension plan in essence, the stakeholder pension offers less control over the investments than the PPP, but more flexibility over the contributions. They are generally the least costly option and allow the savers to increase, decrease, and temporarily pause their contributions at any time without immediate consequences.
Stakeholder pension plans are commonly utilised by savers who can’t afford to get a personal pension plan or simply don’t want to invest as much and prefer a low-cost option. They are also a great option for savers who want to consolidate multiple pension schemes into one, as they are portable and can easily be transferred.
Other Types of Pensions
In addition to private pensions, there are also retirement plans that are not created by the savers themselves, such as;
Workplace pension is a retirement savings plan offered by employers to their employees as a part of their benefits package. In this type of pension plan, the saver contributes a portion of their wages, while the employer tops it with a contribution of their own.
State pension is a government pension arrangement paid to eligible individuals who have reached a certain age and have met certain contribution or residency requirements. It’s a form of retirement income and is designed to provide a basic level of financial support to individuals in their later years.
Besides who makes the contributions, the main difference between private and non-private pensions has to do with their benefits. While the benefits of private pensions are decided on the amount of money and the investment performance of the fund, the benefits of state and workplace pensions are decided on a formula.
Compare Your Options Further
- Self-invested personal pensions (SIPPs) and personal pensions are popular retirement-planning options in the UK. And yet, many Brits know little about these concepts. To help you out, we cover the fundamentals of SIPP and personal pensions, how they stack up against each other, and what you should consider when making a decision.
- Before you start planning trips you want to take in your golden years, you need to ensure there will be enough gold in that pot. You probably have a workplace pension already, but you can explore self-invested personal pensions if you feel a bit more adventurous.
- Choosing between a Lifetime ISA or pension could be your golden ticket for retiring in style, so let’s learn about the ins and outs of these long-term saving instruments.
- Saving for your future is essential, but finding the right way to invest your money can be overwhelming. For example, should you pay into an ISA or a pension plan? Let's down the options and find out.
- House prices have been on the rise for many years, and it's no wonder why so many people are turning to property as an investment option. However, investing in a pension or increasing pension contributions can also be incredibly beneficial as they are supported by government tax relief. So, which one is the better investment – pension or property? Let's find out!
How to Find the Best Pension Provider
What makes a good provider will depend on your individual needs and priorities. However, some key factors to consider when evaluating a private pension provider include:
Reputation – Start by reviewing independent ratings and reviews to find out what the consumers and experts think about the provider. Are they trustworthy, do they have a track record of delivering strong investment performance over the long term, and other issues that may concern you.
Cost-effectiveness – The private pensions market is competitive and financial institutions are always trying to attract new clients with low prices. Don’t settle for the first option that fits your criteria, and look around to find a more affordable provider that will give you the same service.
Flexibility – Besides matching the investment options you are interested in, it’s important you find a provider that will provide you with the needed flexibility in terms of how you can access and manage your pension funds. This includes options for making contributions, accessing your funds, and managing your investments.
Transparency – The best private pension providers don’t just offer competitive fees and charges, but they are upfront and transparent about them. Choose a provider that will provide you with clear information on how your funds are invested, the risks involved, and how the provider earns its fee.
Customer Service – Great customer service is essential for the success of any business, particularly for financial services where the customers’ life savings are concerned. Find a provider that will be able to answer your questions and address your concerns professionally, resolve your issues, and give you peace of mind.
All of the options on our list can provide you with the above qualities. As long as you are willing to put the effort to research, you should be able to find the right provider for you.
FAQ
What are the costs associated with private pensions?
When can you access your funds?
Are personal pensions safe?
Additional Resources
- The key to successful retirement planning is understanding the options available and finding one that works for you. Whether you're an employee or a self-employed individual, having a pension plan is a secure way to ensure you will have a steady stream of income during your retirement years.
Chris WilliamsOctober 19th, 2023 - A drawdown pension can come in handy during retirement as it allows the holder to draw money from their pension pot as and when they need it. With the right drawdown pension plan, it’s possible to achieve maximum long-term growth with minimum risk. In this guide, we will be looking at the best-performing drawdown pensions available to help you make the best decision for your financial future.Chris WilliamsFebruary 14th, 2024
- When you leave an employer, any benefits that have been accrued in your pension will not be lost, as the fund actually belongs to you. This means that even though you are no longer working with that particular company, you will remain a member of their pension scheme and your money will stay invested as it was prior to leaving.Chris WilliamsOctober 19th, 2023
- Your child might be decades away from retiring – but helping them build their pension early on will help them have a sizable pot once they reach retirement age. With the ability to deposit up to £3,600 per year without paying income or capital gains tax, a junior SIPP account is an excellent way to do so.
Idil WoodallOctober 31st, 2023 - A limited company pension provides a tax-efficient way for the company to build your pension pot for retirement. According to the latest data, most companies in the FTSE 100 channel between 7.5% and 11.5% of the director’s salary to their pensions.
Andrew MurambiOctober 19th, 2023 - What is (hopefully) one of the cheeriest of occasions, retiring abroad, can and often is soiled by an endless amount of paperwork and one big question: whatever will happen to my pension? It seems daunting, but once you understand the process, you'll see it's not rocket science. Here, we explain how it works.
Hristina NikolovskaOctober 18th, 2023 - Regardless of your current financial situation and how young you are, building a substantial pension pot is essential. People work throughout most of their lives, and their retirement is the only time they can kick back, relax, and enjoy the benefits of their hard work.Hristina NikolovskaNovember 10th, 2023
