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Know your legal obligations on pensionsPersonal pensionsPersonal pensions are one way that an employee can make regular payments to provide for retirement. In some cases, employers also make payments into these schemes for the benefit of their employees. Some employers may also arrange for a pension provider to set up a group personal pension for their employees. Both employee and employer contributions qualify for tax relief. At retirement, the fund is used to purchase an annuity (a pension payable for life). The amount of pension payable depends upon the amount paid into the pension fund and how well it has been invested. The age at which an individual buys the annuity, provision for family members in the event that the scheme member dies and whether the pension is to be increased on an annual basis, will all affect how much someone gets. For information about contracting out with personal pension plans, see the page in this guide on contracting out of the State Second Pension and paying Additional Voluntary Contributions. People who are a member of a group personal pension arranged by an employer can continue to make contributions to their personal pensions when they change jobs but will lose any benefits the employer has negotiated. In contrast, under an occupational scheme, once an individual stops working for the employer running the scheme, they can no longer make payments. When an employee retires, they can choose to take up to 25 per cent of the fund as a lump sum. The rest of the fund must be used to buy an annuity or to provide for an income under an interim arrangement. You can get guidance on personal pensions at the Pensions Advisory Service website. You can read about your pension obligations as an employer at the Pension Service website. Subjects covered in this guide
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