A personal or stakeholder pension might be right for you if:

• you want to save money for retirement on top of your workplace pension
• you’re self-employed and don’t have access to a workplace pension scheme
• you aren’t working but can afford to pay into a pension
• your employer offers it as a workplace pension

Personal and stakeholder pensions are private pensions that you arrange yourself. You pay money into a pension fund which you use to buy a regular income when you retire.

Sometimes employers set up group personal or stakeholder pensions for their employees.

Personal pension providers must be registered with the Financial Conduct Authority (FCA). Stakeholder pensions must be registered with the Pensions Regulator.

When you can get your pension

The earliest age you can get a personal or stakeholder pension is usually 55, depending on your arrangements with the pension provider or pension trust. You don't have to be retired from work.

There is help available for choosing the right pension scheme.

Over time you build up a ‘pot’ of money (a pension fund). When you retire you arrange payments through an insurance company, or in some cases through your pension provider. This type of personal pension scheme is called ‘defined contribution’.

The 3 basic steps when arranging your retirement income are:

1. Decide when you want to retire.

2. Decide how you want to be paid.

3. Shop around for the best deal on a regular payment (buying an 'annuity').

Deciding when to retire

Generally, the older you are when you take your pension the higher the payments because your life expectancy is shorter.

Deciding how you want to be paid

When you’re close to retirement you have to decide how you want your pension to be paid.

This will depend on the arrangements you have with your pension provider but usually you’ll have the option to get 25% of the money from your pension fund as a tax free lump sum and the rest as regular payments.

These can be monthly, quarterly, half-yearly or annually.

If all your pension funds total £30,000 or less, you can usually take the whole amount as a lump sum. You have to be at least 60 to do this.

If your personal or stakeholder pension is less than £10,000 you can usually take it as a cash payment, no matter how much you get from other pensions.

In some cases, when you’re under 75 and are expected to live less than a year, you can take your whole fund as a lump sum. You won’t have to pay tax on it unless your pension funds are worth more than the lifetime allowance.

Arranging regular pension payments

In most defined contribution pension schemes you’ll have to buy an annuity (a retirement income). This is a contract between you and an insurance company. You instruct your pension provider to hand over all or part of your pension fund to an insurance company and they give you regular payments until you die.

The amount of the regular pension payments under your annuity depends on how long the insurance company expects you to live and how many years they’ll have to pay you.

To calculate your annuity they could take into account:

• your age
• your gender
• the size of your pension fund
• interest rates
• sometimes your health

You don’t have to buy your annuity from your pension provider. There are different kinds of annuity and you should shop around to get the best deal.

You can either make monthly or lump sum payments to a pension provider. They will send you annual statements, telling you how much your fund is worth.

The amount you get when you retire depends on how much you paid in, how well the fund's investments have done and how you decide for your retirement income to be paid, eg as lump sums or regular payments.

You can take up to 25% of the fund as a tax-free lump sum if you want to.

Your employer offers a personal pension

Many employers offering a group personal pension as their workplace pension pay contributions towards it. However, the rules on how much they have to pay are changing.

If you leave your job or change to another personal pension, the money paid in stays in your pension pot.

You pay money to a pension provider (eg an insurance company, bank or building society) who invests it (eg in shares).

These are a type of personal pension but they have to meet some minimum standards set by the government. These include:

• management charges can’t be more than 1.5% of the fund’s value for the first 10 years and 1% after that
• you must be able to start and stop payments when you want or switch providers without being charged
• they have to meet certain security standards, eg have independent trustees and auditors

You can start making payments into a stakeholder pension from £20 per month. You can pay weekly or monthly. If you don't want to make regular payments you can pay lump sums any time you want.

Your employer offers a stakeholder pension

The rules for stakeholder pensions changed on 1 October 2012. If you’re starting a new job now or returning to one, your employer doesn’t have to offer you access to a stakeholder pension scheme.

If you’re in a stakeholder pension scheme that was arranged by your employer before 1 October 2012, they must continue to take and pay contributions from your wages.

This arrangement is in place until:

• you ask them to stop
• you stop paying contributions at regular intervals
• you leave your job

If you leave your job or change to another personal pension, the money they have paid in stays in your pension pot unless you have it transferred to a different pension provider.

Your pension provider may charge you. Often, this is a percentage of the value of your pension pot. You may see this on your pension statements.

There are limits on charges for stakeholder pensions.

If you have a complaint about how your pension scheme is run, talk to your pension provider first. They have to respond within 8 weeks.

You can get help from the Pensions Advisory Service or complain to the Financial Ombudsman’s Service about how a pension scheme has been marketed to you.

If you think your pension provider has broken the law, you can complain to:

• the Pensions Regulator for workplace pensions
• the Financial Conduct Authority for personal and stakeholder pensions.

You can also contact the Pensions Ombudsman if you’re concerned about how a pension scheme is being managed.

Your pension provider goes bust

If the pension provider was authorised by the Financial Conduct Authority and can't pay, you might get compensation from the Financial Services Compensation Scheme (FSCS).