When you’re young, it’s easy to dissociate from thinking about pensions and retirement. Why bother to think about how much is in your pension pot when you have savings and investments to build, right? Not exactly.
The reality is, contributing to a pension can sometimes feel unappealing when you’re young because you’re not seeing the benefits just yet, and the masses of information and terminology surrounding pensions can also make learning about them feel a little overwhelming.
However, with our research showing there are over 2 million [1] online searches every single month in the UK asking questions about pensions — many people are keen to learn.
That’s why our team here at Wealthify has looked at the 10 most Googled pension questions, and answered them for you. Check them out below.
Please note: Wealthify does not provide financial advice. Please seek financial advice if you are unsure about investing in a pension.
- How to avoid paying tax on your pension
- How to find old pensions
- What is triple lock pension?
- Do you pay tax on pensions?
- What happens to your private pension when you die?
- Can I withdraw my private pension before 55?
- What is a good pension pot?
- What is salary sacrifice?
- How much should I pay into my pension?
- What is a SIPP?
1. How to avoid paying tax on your pension
While there’s no way of avoiding paying tax on your pension once your income exceeds the personal allowance limit, some people opt for the following things to prevent them falling into a higher tax rate bracket:
● Not take all of the 25% tax-free lump sum at once: You don’t have to take your full 25% at one time. You can take your lump sum in instalments or withdraw your balance from it as and when needed. Some people with large pension pots stagger their 25% tax-free lump sum, topping up their income without being taxed on it.
● Only withdraw what you need each year: It’s sensible to only take out as much as you need from your pension to ensure you have a comfortable retirement, while being mindful of your retirement duration and how long you want your pot to last. Many people also monitor their annual withdrawals to stay within specific thresholds.
For example, if you withdraw £50,270 as pension income (rather than tax-free cash) and have no other taxable income, you’ll only be subject to paying the basic taxpayer rate of 20%. This would be based on the amount above your Personal Allowance, which is up to £12,570 per tax year.
For those in Scotland, to pay no more than 21% income tax (intermediate rate), it’s £43,662. Full details of income tax rates in the UK (except Scotland) can be found here. For Scotland’s income tax rates, see here.
2. How to find old pensions
It’s estimated that the average British worker changes jobs every 5 years [2] – that’s roughly 9 different jobs over a career – so it can be easy to lose track of your pension pots along the way.
Lost pensions are very common. The Association of British Insurers estimates there’s a whopping £31.1 billion [3] sitting in lost pension pots in the UK, so finding a lost pension could significantly boost your pot.
How to find old pensions largely depends on the details you still have about your old pensions. If you know the provider of your lost pension, then you can contact them to trace the pension for you using your personal details. If you don’t know the provider of your lost pension, you can try contacting your old employer and ask them to tell you.
However, if you don’t know your provider and don’t want to contact your old employer, you could use Aviva’s pension tracing service. This service allows you to enter your former employers’ details into the online database and will then provide you with contact details for pension schemes you may have paid into.
Read more about how to find lost pensions in our definitive guide, or head over to our pension consolidation page to start your pensions journey with Wealthify.
3. What is triple lock pension?
The triple lock pension is a mechanism that was introduced by the government in 2012 to protect the real value of the State Pension. The triple lock means that the UK’s State Pension automatically increases each year based on inflation, average earnings, or by at least 2.5% each year — whichever is the highest.
How much is the State Pension? The current new State Pension (2024-2025 tax year) in the UK is £221.20 per week. Those who reached retirement age before 2016 may have a different amount as they will be on the basic State Pension. However, the amount you receive through the state pension depends on how many years you paid National Insurance while working.
So, how many years of National Insurance for a full state pension? To receive the full amount of the new State Pension, you’ll need at least 35 years of National Insurance (NI) contributions. Those with less than 35 years of NI contributions before they reach retirement age will still need to have a minimum of 10 qualifying years of paying NI to get part of the full rate.
This is 1/35th for each qualifying year they have. So, those with 20 years would get 20/35ths of the full rate, which would equate to £126.40 each week.
4. Do you pay tax on pensions?
Your pension is treated the same way as any source of income and is subject to the standard rates of income tax. The rate of income tax you’ll have to pay on your pension depends on the income you have from all sources, including your workplace pension, your private pension, and your State Pension.
The current personal allowances on income tax usually means the first £12,570 of your annual pension income will be ‘tax-free’. If your annual pension income doesn’t exceed £12,570, you may not have to pay any tax.
However, you do not need to pay National Insurance on income from pensions.
You can also usually take a ‘lump sum’ of up to 25% of your pension pot tax-free when you retire. The remaining pot is then taxable. For most people, withdrawing this 25% amount is capped at £268,275 (called the lump sum allowance).
5. What happens to your private pension when you die?
When you die, your private pension provider will decide who to pay your money out to. This is why it’s good to list out ‘pension beneficiaries’ by nominating them, to give the provider a clear idea of who you’d like your money to go to.
What is a pension beneficiary? When you take out a pension, you can choose anyone you want to be your pension beneficiary — it doesn’t have to be a spouse or relative, it can be anyone you want.
Currently, most pensions are exempt from Inheritance Tax. This means that inheritance doesn’t have to be paid on your pension when you die, usually as long as the scheme trustees or administrators have discretion over the payment of death benefits.
If there is any income tax to pay, the pension provider should deduct it before the money is transferred to the beneficiary.
From the 2027/2028 tax year, any unspent pension funds will be classed as part of your estate, meaning your pension might be subject to Inheritance Tax. New research from Wealthify has found that 3 in 4 (75%) parents who plan on leaving their child(ren) an inheritance don’t agree with the plans to make pensions subject to Inheritance Tax.
From 2027, beneficiaries will only have to pay Inheritance Tax on pensions if the inherited estate (pension included) exceeds £325,000. This threshold would rise to £500,000 if the deceased is leaving their main home to their children and the estate’s total value is less than £2 million.
What happens to my State Pension when I die? Unlike private pensions, your State Pension will normally stop being paid when you die. But sometimes, your spouse or civil partner could inherit some of your State Pension. More information about this can be found on the government website.
6. Can I withdraw my private pension before 55?
The current age for when you can start taking money from your private or workplace pension is 55. This is due to rise to 57 in 2028. While it isn’t normally below this age, you can contact your provider if you’re unsure of when you can take your pension.
But, can you take money out of your pension early?
You can sometimes take money out of your pension early, but only if you need to retire because of serious ill health, or if you work in certain types of jobs.
The people who can access their personal pension before the age of 55, but who aren’t experiencing ill health, are usually in schemes with a protected pension age (PPA) or protected retirement age (PRA) benefit. These benefits tend to be for people in dangerous jobs, like firefighting or the military.
7. What is a good pension pot?
What is deemed as a good pension pot will vary from person to person, and it all depends on what will provide you with enough money to live comfortably during your retirement. The amount you need depends on how many years you have left until you retire and the income you want each year when you’re retired.
To give a clearer benchmark, the Pensions and Lifetime Savings Association (PLSA) [4] estimates that, as of 2024, a single retiree would need an approximate pension pot size of:
● £40,000-£70,000 for a minimum standard of living
● £300,000-£500,000 for a moderate lifestyle
● £490,000-£790,000 for a comfortable retirement
These figures provide useful guidelines for assessing your retirement goals. The approximate pension fund size assumes a person is purchasing an annuity and are an illustration only, as annuity rates change frequently (to note, Wealthify does not offer an annuity product).
Another common way to estimate how much you’ll need is the 50-70 rule, which suggests aiming for around 50% to 70% of your working annual income in retirement.
For example, someone earning the UK average salary of £37,430 (2024 figures from ONS) [5] would aim for between £18,715 and £26,201 per year in retirement. However, if you still have significant expenses such as mortgage payments, you may need to target a higher percentage of your income.
8. What is a salary sacrifice pension?
Salary sacrifice is a government-backed arrangement that helps both workers and employers save on tax. In any salary sacrifice scheme, a worker agrees with their employer to ‘give up’ part of their salary so it can be directly used for non-cash benefits.
Because the worker agrees to ‘sacrifice’ a portion of their salary, these non-cash benefits are not subject to income tax or NI, so the worker’s taxable income is reduced, which can sometimes mean they pay a lower tax rate than if not in the scheme.
A salary sacrifice pension scheme allows workers to pay their ‘sacrificed’ salary directly into their pension pots.
Salary sacrifice pension schemes can be particularly beneficial for those paying more than the basic rate of income tax as it can put them back into the lower tax bracket.
9. How much should I pay into my pension?
It can be tricky to know where to begin when it comes to thinking about how much you should pay into your pension. The figure will differ for everyone, and there is no ‘one size fits all’ contribution.
If you’re just starting with your pension contributions, a good rule of thumb is to divide your age by two and contribute that as a percentage of your salary. For example, if you were 28 and hadn’t contributed to a pension yet, you’d ideally start on a 14% contribution of your income.
However, if you’re someone who has been consistent with your pension contributions since you started work, or you’re someone who is closer to retirement age, you may find yourself looking to increase your contribution amounts and asking: how much can I pay into my pension?
While there’s no upper limit to how much you can contribute to your pension each year, for most people there is an annual allowance of £60,000, or 100% of your income—whichever is lower. This allowance includes total contributions: your own, the government’s and your employer’s (if they are contributing too).
If you have more than one pension, these limits apply across all of your pension pots, combined.
10. What is a SIPP pension?
A SIPP (Self-Invested Personal Pension) is a tax-efficient personal pension that could give you more flexibility and control over your retirement pot. Unlike a workplace pension, you can pay your own money into a SIPP, which will then typically be invested in a wide range of investments, including shares, bonds, and property.
A SIPP provides two main tax benefits: you don’t pay capital gains or income tax on your investments as they grow, and you can get a government tax relief top-up of 20% on personal contributions, up to certain limits.
So, if you put in £80, the government will then add another £20, turning that initial £80 into £100.
Another benefit is that you can adjust how much you pay, making it a popular option for self-employed people looking to make personal contributions — and for those looking to have more than just their workplace pension for retirement.
Can you have a SIPP and a workplace pension? Yes, not only can you have both a SIPP and a workplace pension, but having both could mean a more comfortable retirement. However, when running two or more pensions, you must stick to the rules on pension allowances.
References:
1: 2,082,730 monthly question-based online searches about pensions (according to Semrush data, accurate as of March 2025)
2: https://standout-cv.com/stats/career-change-statistics-uk
3: https://www.abi.org.uk/news/news-articles/2024/10/brits-missing-31.1bn-in-unclaimed-pension-pots/
4: https://www.retirementlivingstandards.org.uk/How-to-estimate-likely-RLS-2024.pdf
