Pension options explained - couple camping

Pension options explained

Call 0808 164 2664
for honest advice


A pension is simply a tax-efficient long-term savings plan that could make your retirement more comfortable.

There are many different pension options, so it can be helpful to fully understand each type of pension and how the pension you currently have could impact your future.

Poor financial performance, excessive and hidden fees, as well as miscalculation of risk could cost your pension the equivalent of seven years’ worth of income. That’s money you could be losing for your retirement.


Pension options explained - couple camping

Different types of pension

Defined Contribution Pensions

These are ‘Pot of Money’ pensions where the benefits provided take into account the value of the fund at retirement. They can be personal pensions or occupational pensions. There are no guarantees as to what pension will be provided. This will be a reflection of contributions made and investment growth. 

Defined Benefit Pensions

These offer the promise of a guaranteed pension at retirement which reflects the length of service with an employer. It will be based on either the Final Salary or Average Career Salary of the employee. Providing the company is still in existence, there is no investment risk for the pension receiver. This type of pension is becoming less common.
Our Final Salary Advice Service can assess your Defined Benefit pension.

Private Pensions

This is a generic term for pensions that are not workplace schemes. Have a number of private pensions? Learn about Pension Consolidation here.

Group Personal Pensions

Employer-sponsored schemes – each member has a personal pension plan, and their contract is with the pension provider.  The employer’s role solely is to select the scheme provider, decide if there should be any restrictions on fund choices and take contributions from the employee’s pay and forward them with employer contributions to the pension provider. 

Self-Employed Pensions

A private pension arrangement or personal pension is taken out by a sole-trader or self-employed worker.

SERPS Pensions

State Earnings Related Pension (formerly Graduated Pension and subsequently State 2nd Pension or S2P) was an additional element of State Pension for employees.  The amount of pension was linked to the employee’s salary. SERPS was abolished in 2016 when the flat rate State Pension was introduced. 

Personal Pensions

Personal pensions are contracts between the pension member and an insurance company or another pension provider.

SIPP Pensions

These are personal pensions where the member has a much wider choice of investments, including commercial property and single company shares. Find out more about SIPPs.

Stakeholder Pensions

Personal pensions with a set of rules that impose amongst other things a maximum annual management charge (AMC), low minimum contribution levels (£20 per month) and an appropriate Default fund. Learn more about Stakeholder Pensions here.

FSAVC Pensions

A private pension linked to an employer’s Defined Benefit Scheme but separate from the Scheme’s internal Additional Voluntary Contribution (AVC) arrangement – largely defunct since the rules were eased several years ago, allowing people to contribute to both personal and employment schemes as they wish.

Money Purchase Pensions

This is another name for Defined Contribution Pensions.


Pension options explained - couple cooking

What you should know about today’s pension market

The private pension market can be a minefield – and recently there’s been a vast array of changes to pension tax relief. Pension reforms are constantly being put forward, and it’s only a matter of time before even more changes are made. It can be very hard to keep up.

But don’t worry, that’s where Pension Works comes in. We specialise in private pensions and our free, no obligation assessment of your pension will make sure your retirement is on the right track. We’re here to help you understand all of the options available to you and enable you to secure the comfortable retirement you deserve.


Peace of mind

We work with all major UK pension providers allowing us to find the pension that helps you meet your retirement goals, and ensures your retirement is in experienced hands.

Pension Fees Calculator

Our free pension HealthCheck will carefully assess whether your private pension is being consumed by excessive fees or hidden charges, which could be preventing you from retiring with extra funds.

Simply provide your pension pot size and age below, to calculate how much we could help your pension grow:

The higher the charges, the longer it may take you to retire and the less you could be retiring with.