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There is a number of tax efficient ways to provide for a comfortable retirement. This is a complex area of financial planning and choosing the right vehicle requires a detailed understanding of your personal circumstances, tax position, employment status and attitude to risk.


A personal pension is an arrangement made in your name over which you have personal control. You can alter your contributions, suspend them, or stop them completely. Contributions are restricted to £4,000 under these plans where an individual has already flexibly accessed any income under another money purchase plan.

You will be eligible to take 25% of your accumulated fund tax-free when you retire, the earliest age being from 55. There are a range of options when you decide to take benefits such as purchasing an annuity or electing capped or flexible drawdown.

Personal Pensions usually offer a range of investment mediums to suit your attitude to investment risk, and you can change your investment at any time.

Stakeholder pensions are similar to personal pensions, but have their charges capped at 1.5% for the first 10 years, reducing to 1% thereafter. Whilst stakeholders are generally considered a little cheaper than personal pensions, investment choices may be restricted.


A Self-Invested Personal Pension (SIPP) and a Small Self Administered Pension Scheme are  tax-efficient wrappers within which a wide range of investments can be held. SIPPs have the same tax benefits and regulations as conventional personal pension plans but have control over the investment choice – each SIPP is unique to the individual.

Otherwise, it operates in the same way as a conventional personal pension in respect of contributions and eligibility, for tax purposes. A SIPP must appoint a scheme administrator, usually the recognised product provider.

A SSAS is a form of Occupational Pension Scheme which allows greater control and flexibility for owner managed firms. These schemes have to be established by an employer for an employee but once established, unlike SIPPs, can accommodate the interests of more than one member or employer – and can admit members who are not employees. They are a very attractive vehicle for co-directors within a business who have common investment aims – and who may well wish to purchase assets jointly within the same framework.

They may also be considered as family pension trusts, which can house and utilise the pension savings and aspirations of a family or of another affinity group and can provide a medium in which core assets may be passed from generation to generation.

SSASs established by an employer are separate from the employer and may continue even when the employer is no more.

The complex nature of a SIPP and a SSAS means that they are not suitable for all investors. Often, the benefits of ‘self-investment’ are only advantageous to people with very large funds and/or investors with some level of sophistication when it comes to investment decisions. Often, there are additional charges for arranging and dealing within a SIPP and these charges would erode smaller funds quickly.

Just some of the benefits of these types of arrangements include:-

  • Company and personal pension contributions are deductible against tax.
  • No income tax charge on allowable investments.
  • No capital gains tax due on disposal of investments.
  • A tax free lump sum on retirement.
  • An income in retirement.
  • Tax free death benefits in the form of a pension or a lump sum on death before age 75.
  • Inheritance efficient form of investment.
  • Control for member(s).
  • Invest in property.
  • Invest pension funds in your own business (SSAS).
  • Avoid upfront fees and increase capital gains.
  • Access investment returns.
  • Consolidate pensions and reduce pension charges substantially.

Pensions are a long-term investment. You may get back less than you put in. Pensions can be and are subject to tax and regulatory change therefore the tax treatment of pension benefits can and may change in the future.

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