What is a personal pension?

You should have three main pension types on your radar to better understand your retirement savings:

This article will guide you through personal pensions and where they fit into your retirement planning.

What is a personal pension?

A personal pension (or a private pension) is a tax-efficient savings account you can set up for retirement. Unlike workplace pensions, which your employer sets up, personal pensions are set up and managed by you – giving you more control over your savings. The amount you end up with will depend on how much you’ve paid into it and how well your investments have performed.

A CIRCA5000 personal pension is a type of self-invested personal pension (or SIPP). These pensions give you more flexibility than other types of pensions because you can choose your own investments and contribute as often as you like. You can find out how personal pensions stack up against other types that are available in the UK – including state pensions and workplace pensions – with our guide. The type of pension that we offer at CIRCA5000 is a personal pension.

In the UK, anyone under the age of 75 can open a personal pension. You may want to open one if you:

  • Are self-employed with no access to a workplace pension
  • Have access to a workplace pension but would like to save more money for your retirement
  • Would like to combine old workplace pensions into one place

How do personal pensions work?

By setting up a personal pension, you can keep all of your retirement savings in one place. If you open a CIRCA5000 personal pension, you’ll be able to manage and monitor your savings through the app easily.

To get started, you can transfer any existing pension funds into your CIRCA5000 pension pot; learn more about the benefits of consolidating your pension here.

How much can I contribute?

A CIRCA5000 pension gives you the flexibility to contribute to your pension pot in a way that suits you. You can make one-off contributions whenever you like or set up a regular contribution – or you can do both! You can pause regular contributions if you need to or increase or decrease the amount you’re adding to your pension whenever you like.

The minimum contribution you’ll be able to make is £5, which will be collected from your registered debit card.

You’ll have a personal pension allowance, which will determine how much you can pay into your pension pot each year. This will differ from person to person and vary depending on whether or not you’ve paid income tax that year. Your allowance includes your own contributions, as well as the basic government tax rate relief if you:

  • Have paid income tax — you can contribute up to your gross annual income or a maximum of £40,000 (whichever amount is lowest).
  • Haven’t paid income tax — the maximum amount that you can contribute is £2,880. However, you’ll still receive the basic tax rate relief from the government, which will make your total annual allowance £3,600.

If you have an adjusted annual income of £240,000 or more, your annual allowance reduces by £1 for every £2 of income earned above £240,000, down to a minimum annual allowance of £4,000.

Please speak to a financial advisor if you’re unsure about your annual allowance.

When can I draw a private pension?

Since personal pensions are intended to help you live comfortably during retirement, you can’t take out the money as freely as you can with other savings accounts.

Currently, you won’t be able to access your personal pension until the age of 55. But, when you do, you can take 25% of it as tax-free cash. If you’re unsure about the rules and regulations around private pensions, please speak to an advisor or visit our support page.

Tax relief on personal pension contributions

Similarly to ISAs, personal pensions allow you to grow your money without worrying about your UK income and capital gains tax.

You will also get tax relief on your contributions – on 100% of your earnings – up to £40,000 per tax year. This means that the government will top up any money you invest into your personal pension by up to 25% (higher or additional-rate taxpayers may be able to claim back more). If you have a CRICA5000 personal pension, we’ll automatically claim this basic tax relief for you. This will then be added to the cash allocation of your portfolio and invested next time your account is rebalanced.

You will also get tax relief on your contributions – on 100% of your earnings – up to £40,000 per tax year.
You will also get tax relief on your contributions – on 100% of your earnings – up to £40,000 per tax year.

How can I set up a personal pension?

If you’d like to set up a personal pension with CIRCA5000, follow the steps below.

1: Sign up and download the app

First, you’ll need to download the CIRCA5000 app and sign up. To complete your application, you’ll need your debit card details (so you can add money to your account) and National Insurance Number to hand.

2: Choose your investments

Confirm that you’d like to set up a personal pension (you’ll notice that we also offer investment accounts, including ISAs, GIAs and JISAs). Then, choose your portfolio. We have three types to choose from:

  • Planet
  • People
  • Planet and People (a combination of the two).

Finally, choose a risk level: cautious, balanced or adventurous.

3: Set up your contributions

Decide and confirm how you want to contribute to your pension. You can choose to make a one-off contribution, a monthly contribution (investing automatically each month) or both. You can amend this in the app if you change your mind at any point, or if you need to make adjustments to your contributions.

4: Enter your personal details

To complete your application, we’ll need some basic information from you, including:

  • Your name, email address, date of birth and a contact number
  • Your National Insurance Number (which is required for trade reporting)
  • Your nationality. Non-UK nationals will need to provide a National ID.

You’ll need to accept our Terms and Conditions to proceed with your application.

Please note: CIRCA5000 will never sell your details to third parties. We need the information listed above to perform some security checks, in order to confirm your identity.

5: Your account will be verified

To complete your application, we’ll need to verify your identity. We aim to complete these identity checks electronically using the information you have provided, so it’s important that your details are entered correctly.

We may need to contact you for further documentation. We will get in touch by email and via the in-app chat function to request these.

Once you've verified your identity, any pending contributions will be collected within 15 minutes. Once this has been received, it’ll automatically be invested for you. You’ll then be able to monitor and manage your investments in the app.

When investing, your capital is at risk. You should carefully consider whether or not to open a CIRCA5000 pension. Tax rules and reliefs depend on your personal circumstances and may change. We do not provide financial or tax advice.

Important information - Investments can go down in value as well as up, so you can get back less than you invest. The information on this page isn't investment advice. If you're not sure if an investment is right for you, please seek advice. Tax rules can change and depend on individual circumstances.