A pension is a long-term savings vehicle designed to help you build a retirement fund in a tax-efficient way. Contributions benefit from tax relief, investments grow free from UK income and capital gains tax, and you can usually access your money from age 55 (rising to 57 from 2028).
There are several types of pensions, including the State Pension, workplace schemes, personal pensions, and Self-Invested Personal Pensions (SIPPs), each with unique features and benefits. Workplace schemes often include employer contributions, while SIPPs offer greater investment flexibility.
Key Benefits:
- Tax relief on contributions — receive a government boost at your highest marginal rate.
- Tax-free growth — no UK tax on income or gains inside your pension.
- Tax-free lump sum — usually 25% of your pot at retirement.
- Estate planning advantages — pensions can be passed on tax-efficiently.
The standard annual allowance for 2025/26 is £60,000, with special rules for high earners and those who have accessed pensions flexibly. You may also be able to use carry forward to make larger contributions by using unused allowances from the previous three tax years.
When it comes to accessing your pension, you can take a lump sum, draw an income while keeping funds invested (drawdown), or buy an annuity for guaranteed income. The right choice will depend on your goals, tax position, and retirement plans.
Pensions also play a key role in estate planning. Depending on your age at death, benefits can often be passed to beneficiaries tax-free or taxed at their marginal rate. However, upcoming legislation changes from April 2027 could bring unused pensions into your estate for inheritance tax purposes.
At Tacit, we offer tailored pension solutions in partnership with AJ Bell Investcentre, from cost-effective Retirement Investment Accounts to fully flexible SIPPs for larger funds. Your assets are held securely with AJ Bell Securities Ltd, ensuring robust safeguarding while we focus on managing your investments.
Download the full guide for a detailed breakdown of pension types, allowances, investment options, and planning opportunities.
