Personal Pensions Explained

Personal pension plans are those that are available from financial bodies such as banks, and what they do is that they invest your savings, the money you put in, on your behalf in a range of different investment vehicles that vary considerably from scheme to scheme and also with the options that you choose to invest in within the scheme.

You can then get the income out of a pension that is a personal pension from the age of 50 onwards (in 2010 this will move to the age of 55 instead).

Now, people can create as many personal pensions as they want, though for practical limits people will obviously want to limit it, and also there is no affect at all on the basic state pension by setting these up - you will stil be able to get it.

There is no limit as to how much you can save int oa personal pension, and you will get tax breaks called tax relief on the amount you put into the pension, which will match up to exactly what your income is (with an allowance threshold). If you put more than that amount in then you will be taxed.

The reason for this is that the government wants to encourage people to save for retirement so that they have enough, particularly after the pensions timebomb as it is known that is widely agreed to have been created by Gordon Brown in the period when he was Chancellor of the Exchequor.

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