With the cost of living increasing, many people are finding that state and workplace pensions are not enough to fund the retirement lifestyle they want. Setting up a private pension gives you greater flexibility and freedom around your retirement, as Paul Hardy explains.

Should you set up a private pension? Matthew Douglas

What is a private pension?

A private pension is a personal pension that you set up to save for retirement independently from your workplace pension scheme. 

Typically, private pensions are defined contribution schemes, which means you put money into a pot which is invested, and your retirement income is determined by your contributions and the investment growth. 

Unlike a workplace pension that might lock you into fixed monthly payments, private pensions grant you the freedom to pay in regularly or via less frequent lump sum payments. Similarly to workplace pensions however, private pensions are eligible for tax relief.

Should you set up a private pension? 

Adding a private pension to your financial portfolio is advisable for various reasons. It provides diversification beyond your workplace pension, allowing for a more personalised approach to achieving your financial goals. 

Unlike standard workplace pensions, private pensions often come with the option of receiving guidance from a financial adviser; a valuable resource for making informed investment decisions.

While retaining your workplace pension is important, as opting out could lead to your employer no longer contributing, many employers allow you to set up a private pension alongside your existing one. 

This flexibility is particularly beneficial for those juggling multiple workplace pensions, offering the opportunity to consolidate and manage old, dormant pensions in a new private pension account.

What are the benefits of a private pension?

A key advantage of private pensions is the expert management of your investments, ensuring your money works harder for you. 

A private pension also provides clear insights into your retirement finances, addressing uncertainties about when and how to retire. This clarity on what you’ll receive in retirement serves as a foundation for future financial decisions, especially when you change jobs. 

At Matthew Douglas, our team of retirement planning experts are here to help you ensure your pension is right for you. Get in touch with us to discuss your options.