A way to save for retirement with tax benefits. The government tops up what you put in.
Pension
A way to save for retirement with tax benefits. The government tops up what you put in.
By Scrimpr
Updated 18 Jan 2026 What is a pension?
A pension is a long-term savings plan for retirement. You put money in during your working life, it grows over time, and you take it out when you stop working. The government encourages this by giving you tax relief on what you contribute.
Why use a pension?
Tax benefits. When you pay into a pension, the government adds money on top. A basic rate taxpayer puts in £80, and the government adds £20 – that’s an instant 25% boost before any investment growth.
Higher rate taxpayers can claim back even more through their tax return.
What types of pension are there?
- State Pension – paid by the government based on your National Insurance record
- Workplace Pension – set up by your employer, who also contributes
- Personal Pension – one you set up yourself, including SIPPs
When can you access a pension?
Usually from age 55 (rising to 57 in 2028). The State Pension has its own pension age, currently 66 and rising.
When you access your pension, you can usually take 25% tax-free. The rest is taxed as income.
Key points
- Government tops up your contributions – via tax relief
- Money locked until 55 – (57 from 2028)
- 25% tax-free at retirement – rest taxed as income
- Different types for different situations – state, workplace, personal
