FAQs for members
A pension is a long-term savings plan you use to save for an income when you retire.
You pay money in to your pension. If it’s a workplace pension, your workplace usually pays money in, too. The money is invested to help it grow and build up over time.
When it’s time to retire, you get an income from the pension. There are different ways to get the income, depending on what type of pension it is.
These are the three main types of pension you’re likely to come across:
Follow the links to find out more.
A personal pension is a flexible, tax efficient way individuals can save for their retirement.
It is a type of private ‘defined contribution’ or ‘money purchase’ pension arrangement that is usually set up between a pension scheme provider and an individual.
Both workers and the self-employed can choose to have personal pensions. Workplaces may choose to make contributions to a worker’s personal pension arrangement, although they are not required to do so.
There are different types of personal pensions including stakeholder pensions and self-invested personal pensions.
A workplace pension is a pension your workplace arranges and offers you.
Auto enrolment means UK workplaces are required by law to offer a workplace pension. They must put workers who qualify into the pension and pay in to their pension savings.
Most modern workplace pensions are defined contribution (DC) pensions. In a DC pension scheme your pension savings build up based on:
- payments from you and your workplace, and
- returns on your investments.
Many workplace pensions used to be defined benefit (DB). In a DB pension you build up an amount of pension each year based on:
- part of your salary, and
- the number of years you build up the pension.
But DB pensions are rare nowadays. They’re usually older workplace schemes or public sector pensions.
This is a pension the government pays you when you reach your State Pension age. You build up State Pension by paying National Insurance contributions or receiving National Insurance credits (paid to carers, jobseekers and people on some family and sickness benefits).
The full new State Pension applies to people who reach their State pension age on or after 6 April 2016. The full rate for 2026-2027 is £241.30 a week. You need 35 qualifying years, when you paid full-rate National Insurance contributions or received National Insurance credits, to receive the full new State Pension. If you have fewer than 35 qualifying years, you’ll get a lower amount of State Pension.
(We say ‘new’ State Pension because the old State Pension arrangements still apply to people who reached their State Pension age before 6 April 2016. You can find out more about the previous State Pension arrangements on the government website.)
You can apply for a State Pension forecast to see how much your State Pension might be. You can also check your State Pension age.
If your State Pension forecast shows you might not get the full amount, check your National Insurance contribution record. You may be able to pay extra National Insurance contributions to get a higher amount of State Pension.
There’s more information about the State Pension on the gov.uk website.
In a defined contribution (DC) pension, you build up pension savings based on:
- payments from you (and usually your workplace, if it’s a workplace pension),
- tax relief from the government, if you qualify, and
- how your investments do.
To qualify for tax relief you need to earn enough to pay income tax. If you don’t you’ll get a tax top-up from the government – but this will be paid into your bank account, not your pension savings.
When you retire, you use the money you’ve built up to give yourself a retirement income. But, unlike a defined benefit (DB) pension, the amount of income you’ll get isn’t guaranteed.
Most modern pensions are DC.
A defined benefit (DB) pension is a workplace pension that guarantees you an income for life. It’s based on your salary and the number of years you’re actively building up the pension.
When you retire, the pension pays you an income for life. Your employer is responsible for making sure there’s enough money to pay your income.
DB pensions are rare nowadays. They’re usually older workplace schemes or public sector pensions.
now:pensions is a master trust pension. Its legal name is the NOW: Pensions Trust.
A master trust is a pension scheme lots of different employers take part in.
A trustee – (a person or organisation that manages money or assets on behalf of, and for the benefit of, someone else) – manages the master trust and makes decisions on the members’ behalf. The trustees of a master trust are legally responsible for ensuring that the scheme is run properly, in line with its trust deeds and rules, and pensions law and regulations.
They are also responsible for ensuring that members’ pension savings are kept safe and invested appropriately, and that money from the scheme is paid out correctly and on time.
now:pensions is a defined contribution workplace master trust. We’ve been formally authorised and regulated as a master trust by The Pensions Regulator (TPR) since September 2019.