Beginners’ Guides

Beginners’ guide to pensions and retirement

How pensions work

Pensions can sometimes seem a confusing subject, full of financial jargon and complicated rules. So let’s start with the basics.

A pension is a tax efficient way of saving for your retirement. When you retire or reach a certain age, the pot of money you’ve saved is used to provide a taxable income until you die.

The current advantage of pension savings over the various other ways of saving is that you get tax relief on the money you put in – but more of that later in this guide. The exact tax benefits of a pension will depend on your personal circumstances and tax rules, both of which can change.

The level of income you receive from your pension plan will depend upon a number of factors including the value of the plan when you decide to take your pension, which isn't guaranteed and can go down as well as up.

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