Types of personal pension scheme

Personal pensions have been a great success story in UK pensions since they first became available on 1 July 1988. Despite an almost constant barrage of news stories warning that few individuals are saving enough for retirement, there can be no denying that some tens of millions of individuals have done so through a personal pension. An individual's personal pension scheme may also be used by an employer to fulfil their automatic enrolment obligations, provided it satisfies certain minimum requirements.

Remarkably, the expression is no longer defined in HMRC legislation or practice, and for the purposes of this overview, the expression 'personal pension' means a registered pension scheme which is not an occupational pension scheme (as defined in section 150 of the Finance Act 2004 (FA 2004)) or an annuity policy providing benefits previously accrued under an occupational pension scheme.

Personal pensions are generally provided through one of the following arrangements:

1. •

   individual personal pensions (insurance-based or other unitised investment-based)

2. •

   group personal pensions (GPPs)

3. •

   stakeholder pension schemes

4. •

   self-invested personal pensions (SIPPs), or

5. •

   legacy arrangements (such as retirement annuity contracts and free-standing