Personal Pensions

A personal pension plan (PPP) is a type of defined contribution arrangement.

It is essentially an investment policy that provides an income in retirement.  It is available to any UK resident who is under 75 years of age.  The policyholder contributes to the plan, the money is invested and a fund is built up.  The amount of pension payable when the policyholder retires is dependent upon:

  • the amount of money paid into the scheme
  • how well the investment funds perform
  • the ‘annuity rate’ at that date of retirement.  An annuity rate is the factor used to convert the ‘pot of money’ into a pension.

Currently the policyholder can retire at any age from 55.  When the policyholder does retire, they can generally take up to 25% of the value of their fund as a tax free lump sum.  The remainder of the fund must be used to provide income.

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