Types of pension

Different types of pension plan

There are three different types of pension UK savers can get:

• State Pension
• Workplace pension
• Personal pension

Most people who have had a job will be able to draw on the State Pension when they retire. As at August 2025, the government was paying it out to about 13.2 million people. The amount you’ll get will depend on how many years you’ve paid National Insurance (NI) contributions.

Most people who’ve been in permanent employment will have at least one workplace pension. On average, we'll work for six different employers in our lifetime, so you could end up with up to six pensions through them.

And if you’ve been a freelancer or just wanted to save a little extra, you might have a personal pension, too. In 2023-2024, about 6.8 million people across the UK were paying into one.

State Pension

The new UK State Pension is the pension that the government pays most of us when we reach 66, or 67 after 2028. For 2026 to 2027 this is:

• £241.30 per week
• £12,547 per year

To get the full amount, you’ll need 35 years of contributions for NI credits (which you can also get if you’re unemployed, ill or a parent or carer). You can’t claim it if you’ve paid in for less than ten years.

If you haven’t paid NI for 35 years, the government will base your payments on how many years you have paid it for. You get 1/35 of the full amount for every year you’ve paid in. For example:

• 30 years gives you 30/35 x £241.30, which is £206.80 a week
  15 years gives you 15/35 x £241.30, which is £103.40 a week
  10 years gives you 10/35 x £241.30, which is £68.90 a week

You might be able to top up any NI gaps by paying voluntary contributions.

You can find out more about the State Pension and check your eligibility on Gov.uk. On its own it probably won’t fund your ideal retirement. So you’ll need to check that you’re saving enough elsewhere to top it up.

Workplace pensions

Workplace pensions are the pensions that employers set up for you. Each new employer usually has to create one for you when you join, if you’re:

• Aged between 22 and State Pension age
• Earning at least £10,000 per year
• Working in the UK

They’ll probably set up a defined contribution pension for you. It will pay out an amount based on how much money you put into it over the years and how well your investments do. You might be able to control how your money’s invested – check with your employer or provider for details.

Defined contribution pensions are the most common type of workplace pension, but they’re not the only one. You might also have a defined benefit pension from a past employer. They pay out an amount based on your salary when you retire or leave the company. These days they’re pretty rare.

Paying into different types of workplace pension

Once your workplace pension is set up, you’ll start saving a small percentage of your salary straight into it. The government will usually add a little as tax relief. Your employer will probably match some or all of your contributions too, from a minimum of 3% up to a maximum they’ll set themselves.

Of course, paying into a workplace pension cuts down your take-home pay. But that can mean you start getting or increase any existing tax credits or income-related benefits. It can also reduce any student loan repayments you have to make.

Personal pensions

Personal pensions are the pensions that you set up for yourself. Just like a workplace pension, you can save as much into them as you want to, for as long as you need to, although the amount you receive tax relief on is restricted.

Taking money out of your workplace or personal pension pot

You can choose when you start taking money from your pension pot. It’ll usually be when you’re 55 or older, rising to 57 from April 2028. You’ll be able to take up to a quarter of the money in your pot as a tax-free lump sum, subject to allowances. You’ll usually pay tax on the rest.

You can take your money out:

• As cash
• By buying an annuity, which will give you a guaranteed income for life or a fixed period
• By opting for drawdown, to take out however much you need whenever you need it
• As smaller lump sums

Your provider will talk you through your annuity and drawdown choices. If you don’t like what they’re offering, you’re free to transfer your pot to another provider.