- At a glance: the main pension types
- The State Pension
- Workplace pensions: defined contribution
- Auto-enrolment: the minimums
- Workplace pensions: defined benefit
- Personal pensions, SIPPs and stakeholder pensions
- When and how you can take a private pension
- Which type should you focus on?
- Frequently asked questions
There are three main types of pension schemes in the UK: the State Pension paid by the government, workplace pensions arranged by your employer, and personal pensions you arrange yourself. Private pensions (workplace and personal) come in two forms: defined contribution, where you build a pot whose value depends on what's paid in and how investments perform, and defined benefit, where the scheme promises an income based on its rules, usually your salary and years of service.
Most people end up with more than one of these. You might have State Pension entitlement from your National Insurance record, a couple of workplace pots from old jobs and a personal pension or SIPP if you've been self-employed. Knowing which type is which tells you who carries the investment risk, what you'll get and when you can take it.
At a glance: the main pension types
| Type | Who sets it up | What decides what you get | Who carries the risk |
|---|---|---|---|
| State Pension | The government | Your National Insurance record | The government |
| Workplace defined contribution | Your employer | What's paid in and investment performance | You |
| Workplace defined benefit | Your employer | The scheme's rules, usually salary and years worked | The scheme and employer |
| Personal pension or SIPP | You | What's paid in and investment performance | You |
| Stakeholder pension | You or your employer | What's paid in and investment performance | You |
The State Pension
The new State Pension is for people who reach State Pension age on or after 6 April 2016. The full rate is £241.30 a week, as of October 2026, and what you get depends on your National Insurance record. If your record started after April 2016, you'll need 35 qualifying years for the full amount. Each year it rises by the highest of average earnings growth, CPI price inflation or 2.5%. You can check your forecast on GOV.UK, and you can't take it before State Pension age.
Workplace pensions: defined contribution
A workplace pension is arranged by your employer, and you'll also hear it called an occupational, works or company pension. Most are defined contribution: a percentage of your pay goes in every payday, your employer usually adds to it, and the government adds tax relief. The pot is invested, so its value can go up or down. Your workplace scheme is covered in more depth in this workplace pension guide.
Auto-enrolment: the minimums
All employers must provide a workplace pension. Your employer must automatically enrol you if you're classed as a worker, you're aged between 22 and State Pension age, you earn at least £10,000 a year and you usually work in the UK. In most schemes, contributions are based on earnings between £6,240 and £50,270 a year before tax.
| Minimum contributions (from April 2019) | Share of qualifying earnings |
|---|---|
| Your employer pays at least | 3% |
| You pay | 5% |
| Total minimum | 8% |
GOV.UK's own example shows how tax relief fits in: you put in £40, your employer puts in £30, you get £10 tax relief, and £80 goes into your pension. The point people miss is that you can still ask to join if you earn under £10,000. If you opt in and earn more than £520 a month, £120 a week or £480 over 4 weeks, your employer must contribute the minimum too.
Workplace pensions: defined benefit
Defined benefit schemes are sometimes called final salary or career average schemes. What you get depends on the scheme's rules, not on investments or how much you've paid in, and the scheme promises a certain amount each year when you retire. They're most common in the public sector and in older private-sector schemes. GOV.UK notes that contributions are higher for most defined benefit schemes than the auto-enrolment minimums.
Personal pensions, SIPPs and stakeholder pensions
A personal pension is one you arrange yourself, and it's a defined contribution pension: you get an income based on what's paid in, how the investments perform and how you take it. Some employers offer personal pensions as their workplace scheme. There are two named types worth knowing:
- Stakeholder pensions must meet specific government requirements, such as limits on charges, and the provider should be registered with the Pensions Regulator.
- Self-invested personal pensions (SIPPs) let you choose the specific investments in your pension fund yourself, and the provider should be registered with the Financial Conduct Authority.
You usually get tax relief on what you pay into a registered pension. GOV.UK suggests checking the scheme is registered with HMRC, because if it isn't, you won't get tax relief.
When and how you can take a private pension
With both defined contribution and defined benefit pensions, you can usually take up to 25% as a tax-free lump sum, and the most you can take is £268,275 unless you hold a protected allowance. Most schemes let you start at 55 at the earliest, and HMRC's manual confirms the normal minimum pension age increases to 57 from 6 April 2028. Pension providers usually take a management fee, so ask what yours charges.
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If one of your older schemes is tiny, our small pots guide explains when it can be cashed in as a single lump sum.
Which type should you focus on?
This isn't advice, but here's how I'd think about it. If you're employed, the workplace scheme is usually the first place to look, because the employer contribution is extra pay you only get by staying in. If you're self-employed, there's no employer paying in, so a personal pension or SIPP is the usual route, and it's worth checking your State Pension forecast for gaps. If you have a defined benefit pension, think very carefully before giving it up, because you'd be swapping a promised income for an investment pot. The wider pensions picture is covered in this piece on the outlook for defined contribution pensions. For a personal decision, the government-backed Pension Wise service and a regulated financial adviser are the places to go.
Frequently asked questions
What are the main types of pension schemes in the UK?
The main types are the State Pension, workplace pensions arranged by your employer and personal pensions you arrange yourself. Private pensions are either defined contribution or defined benefit.
What's the difference between defined contribution and defined benefit?
A defined contribution pension builds a pot that depends on what's paid in and how investments perform. A defined benefit pension pays an income set by the scheme's rules, usually based on your salary and how long you worked there.
How much must my employer pay into my pension?
Under auto-enrolment the minimum total contribution is 8% of qualifying earnings, of which your employer must pay at least 3%.
What is a SIPP?
A self-invested personal pension is a type of personal pension that lets you control the specific investments that make up your pension fund.
How much is the full new State Pension?
The full rate of the new State Pension is £241.30 a week, and the amount you get depends on your National Insurance record.
