• Pensions
  • What is a pension?

What is a pension?

A pension is a long-term investment that aims to build a fund for your retirement in a tax efficient way. This can be used to provide you with an income when you retire and can normally be accessed from the age of 55.

Fidelity offers a type of pension known as a self-invested personal pension (SIPP).

A SIPP is a tax-efficient way to save for your retirement. You normally get tax relief on your personal savings into a SIPP at the highest rate of tax you pay. The investments in your SIPP will grow free of capital gains tax and any income tax.

Did you know...

Tax benefits include contributions from the government in the form of tax relief, which can mean a £10,000 contribution only costs you £6,000 if you are a higher-rate taxpayer.

Even those who are non taxpayers can contribute up to £2,880 to a personal pension which is topped up to £3,600 by receiving tax relief at 20%.

Accessing your pension savings

In addition to the tax benefits, you have more flexibility and control over your savings and where they are invested. You can choose (with guidance if you like) investments that suit your personal needs and vary your investment mix as your circumstances change.

You will be able to access your pension savings once you reach the age of 55. There are several different ways you can access your savings, and you can chose one, two or a combination of all of the options available to help achieve the right level of retirement income for your needs.

  • Stay invested and take an income (Flexi-Access drawdown) You can normally take up to 25% of your savings as a tax-free lump sum. You can leave your remaining savings invested and start to take an income from them. You decide how much and how often. Typically you’ll have to pay tax on the income you take at your marginal rate of income tax.
  • Withdraw cash (Uncrystallised Funds Pension Lump Sum Payment) You can take all or part of your savings as a cash sum. The first 25% of the cash sum you take will be tax-free, and the remainder taxed at your marginal rate of income tax.
  • Guarantee your income (an annuity) You can use all or part of your savings to buy a guaranteed income for life, called a lifetime annuity. You can normally take up to 25% of your savings as a tax-free lump sum. The annuity income is taxed at your marginal rate of income tax.

This information is not investment advice or a recommendation for any particular product, service or course of action. Pension and retirement planning can be complex, so if you are unsure of the suitability of a pension investment, retirement service or any action you need to take, please contact Fidelity’s Retirement Service on 0800 084 5045 or refer to your financial adviser.

The value of investments can go down as well as up and you may get back less than you invested. Eligibility to invest into a pension depends on personal circumstances and all tax rules may change. With pension products you will not be able to withdraw money until you reach age 55.


Retirement calculator

Take a look at how much you might need when you retire with our easy-to-use retirement calculator.

We’ll then help you figure out a way to achieve that.

Retirement calculator