Your pension is likely to be one of the most significant financial assets you will ever build. Yet for many people, it remains one of the least understood. At Mike Smith IFA, we believe that with the right guidance, your pension can be the foundation of a secure, fulfilling, and financially independent retirement.
What is a pension?
A pension is a long-term savings plan that benefits from valuable tax relief, meaning the government effectively tops up every contribution you make. Basic rate taxpayers receive 20% tax relief on contributions, whilst higher rate taxpayers can claim up to 40% and additional rate taxpayers up to 45%. This makes pensions one of the most tax-efficient savings vehicles available.
You can contribute up to 100% of your earnings each year, subject to the annual allowance of £60,000. If you have unused allowance from the previous three tax years, you may be able to carry this forward and make larger contributions – a strategy that can be particularly valuable for those who have received a bonus, sold a business, or come into a lump sum.
Types of pension
Understanding the type of pension you have is an important starting point. The main types include:
| Personal pensions and Self-Invested Personal Pensions (SIPPs) | Flexible pension plans that allow you to choose from a wide range of investment options. SIPPs in particular offer a broad investment universe. |
| Workplace pensions | Arranged by your employer, often with valuable employer contributions on top of your own. These are typically defined contribution plans, meaning the eventual value depends on contributions made and investment performance. |
| Defined benefit pensions | Sometimes known as final salary pensions, these provide a guaranteed income in retirement based on your salary and length of service. These carry significant value and require careful consideration before any decisions are made. |
How we can help
We provide straightforward, personalised pension advice tailored to your individual circumstances. Our pension planning service covers:
| Pension reviews | We will carry out a thorough review of all your existing pensions, assessing performance, charges, investment strategy, and whether they remain suitable for your needs. We will also check for any valuable guarantees or benefits that could be lost on transfer, such as guaranteed annuity rates or enhanced tax-free cash entitlements. |
| Pension consolidation | Where appropriate, we can bring your pensions together into a single, well-managed plan. This can simplify administration, improve visibility of your overall position, and potentially reduce the charges you pay. We will always ensure consolidation is in your best interests before making any recommendation. |
| Ongoing pension management | We do not simply set your pension up and leave it. We can provide regular reviews to ensure your pension continues to perform as expected, remains aligned with your attitude to risk, and adapts to changes in your life and in legislation. |
| Retirement planning | We help you plan for the retirement you want, including when you can afford to stop working, how much income you will need, and the most tax-efficient way to access your pension when the time comes. This includes considering the interaction between your pension and your State Pension entitlement. |
Pension access and the minimum pension age
The current minimum pension access age is 55, rising to 57 in April 2028. From this point, you can begin drawing from your pension in a number of ways, including taking a lump sum, entering into drawdown, purchasing an annuity, or a combination of these. The right approach will depend on your individual circumstances, and careful planning around how you access your pension can make a significant difference to the amount of tax you pay in retirement.
Why pension planning matters
Without a clear plan, your pension could be working far less hard than it should. Many people are paying more in charges than necessary, invested in funds that no longer reflect their attitude to risk, or simply unaware of what they have accumulated over the years.
Taking professional advice can make a meaningful difference – not just to the size of your pension pot, but to the confidence and clarity you have about your financial future.
What to expect from us
We take the time to understand your circumstances, your goals, and what retirement looks like for you. We will explain your options clearly, without jargon, and provide recommendations that are genuinely in your best interests. As an independent firm, we are not tied to any provider or product range – we search the whole of the market to find the most suitable solution for you.
Our relationship does not end once your pension is in place. We are here for the long term, providing ongoing support, regular reviews, and advice that adapts as your life changes.
FAQs
What is a pension?
A pension is a long-term savings plan designed to provide you with an income in retirement. Contributions benefit from tax relief, meaning the government effectively tops up what you pay in, making pensions one of the most tax-efficient ways to save for your future.
How much can I contribute to a pension?
You can contribute up to 100% of your earnings each year, subject to the annual allowance, which is currently £60,000. Contributions above this may be subject to a tax charge. If you have unused allowance from the previous three tax years, you may be able to carry this forward. We can help you understand how much you can contribute and structure this in the most tax-efficient way.
What happens to my pension if I change jobs?
Your pension does not disappear when you change jobs. Pensions built up with previous employers remain invested and continue to grow until you access them. However, they can be easy to lose track of over time, which is why reviewing and consolidating old pensions is something many people find beneficial.
Can I consolidate multiple pension pots into one?
Yes, in most cases you can. Consolidating pensions can simplify your retirement planning and may reduce charges. However, some older pensions carry valuable guarantees – such as guaranteed annuity rates or final salary benefits – that could be lost on transfer. We always check this carefully before making a recommendation.
When can I access my pension?
From 6 April 2028, the minimum pension access age rises to 57 (currently 55). Some pensions and professions have protected retirement ages. Once you can access your pension, you can usually take up to 25% as a tax-free lump sum, with the remainder subject to income tax.
How are pension withdrawals taxed?
Up to 25% of your pension fund can typically be taken tax-free. Any further withdrawals are added to your other income and taxed at your marginal rate of income tax. Careful planning around how and when you draw from your pension can make a significant difference to the amount of tax you pay in retirement.