The J.P. Morgan Personal Investing guide to pensions
Your pension is a tax-efficient investment product designed to fund your retirement.
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This page was last published on 3 November 2025.
Our guide explains:
- What pensions are
- How pension contributions work
- How tax relief on pensions works
- How to plan for retirement
- Using a Lifetime ISA (LISA) for retirement saving
- How income drawdown works
- Consolidating or transferring your pensions
- Pensions fees and charges
Retirement planning ranks among the most important financial decisions we have to make. But the UK’s pension system can be overwhelming, and it’s not always clear what decisions need to be taken when figuring out how to save for retirement.
J.P. Morgan Personal Investing has written a guide to provide you with information that can help you plan for your retirement. It explains:
1. What pensions are
There is a range of pensions available to help you save for retirement. Whether you're employed, self-employed, or not currently working or earning, you can put your money to work in a pension and benefit from tax relief while doing so.
Provided that you are over the age of 18 and a UK resident and taxpayer, most eligible employees will be automatically enrolled into a workplace pension. Separately, you can open a personal pension. It's a good idea to get ahead and contribute into a pension, and not just rely on the State Pension to fund a comfortable retirement. Tax rules vary by individual status and may change.
2. How pension contributions work
In a workplace defined contribution (DC) pension scheme, a percentage of your salary will normally be contributed into your pension. In most cases and depending on what you earn, your employer will also contribute to your pension.
With a personal pension, you can make these contributions yourself, while some employers may also offer the option of contributing towards your personal pension up to the annual allowance. Personal pension contributions up to 100% of the customer's annual earnings are eligible for 20% tax relief with high earners potentially eligible for more. Personal pensions are particularly useful retirement tools for the self-employed, who lack an employer to offer and contribute into a pension. Even if you are not working and have no earnings, you can still pay in up to £3,600 a year to a pension tax free (paying in £2,800 would be topped up by the government to £3,600). Personal pension contributions up to 100% of the customer's annual earnings or the annual allowance – whichever is lower – are eligible for 20% tax relief with high earners potentially eligible for more.
In both workplace DC schemes and personal pensions, unless you want to choose your own investments, your contributions are then invested by your pension provider into assets, such as company shares, bonds and property.
3. How tax relief on pension contributions works
Pensions can confer unique tax advantages. When you add money to your pension, the government does too. This government top-up is known as pension tax relief and is a 20% government top-up on pension contributions.
If you’re a UK taxpayer and under the age of 75, every tax year you may be able to get tax relief on pension contributions up to 100% of your earnings, or on contributions up to the government-set annual allowance, whichever is the lower of the two. The annual allowance is currently set at £60,000 per tax year, and reduces down to a minimum of £10,000 for higher earners, in what is known as the tapered annual allowance. Those who don't meet the threshold to pay income tax can still receive tax relief on up to £3,600 of pension contributions in a tax year.
4. How to plan for retirement
It's useful to have a plan for retirement. This can include setting goals, which will need to reflect how much money you expect to need in retirement, along with how long you expect to live, working out your likely retirement income and assessing your income options.
There are other means to supplement a pension in retirement. For example, you could take advantage of different tax wrappers and use multiple investment products.
At the time of writing, most pensions are not subject to Inheritance Tax (IHT). This, however, will change from 6 April 2027, when most unused pension funds and death benefits will be treated as part of a person’s estate and therefore be subject to IHT. J.P. Morgan Personal Investing does not provide tax advice.
5. Using a Lifetime ISA for retirement saving
The Lifetime ISA (LISA) is another tax efficient investment product which can be an effective vehicle to supplement your retirement savings. The LISA is a product for people aged between 18 and 39 to put money aside for their first home or retirement. You can contribute up to £4,000 per tax year and the government will give you a 25% bonus – that's up to £1,000 every year until you turn 50. The amount you pay in, not including any bonus you earn, is included in your annual tax free ISA allowance of up to £20,000 per tax year.
You can use your stocks and shares LISA to buy your first home worth up to £450,000 or invest into it until you turn 50, and access the funds from age 60. In either instance, you can withdraw your money tax free, including the 25% government bonus. Withdrawing funds from your LISA outside of these scenarios normally means you will incur a 25% HMRC penalty charge on the withdrawal amount, and you may end up getting less than you originally contributed.
6. How income drawdown works
Income drawdown allows you to take income from your pension when you retire while leaving your pension invested. You can access your money from your pension pot to use when you need it. The rest is left invested in the expectation that it continues to grow.
Whether income drawdown is a good idea for you will depend on your circumstances, health and attitude to risk. Drawdown can give you a more flexible income: you can withdraw different amounts of money from your pension pot at different times depending on when you need it.
You can choose to put your pension into drawdown initially and buy an annuity later with some or all of your remaining pension, or take income until your funds run out. You can also buy an annuity with some of your pension and leave the rest invested.
7. Consolidating or transferring your pensions
Keeping track of your various pensions can be challenging. You could therefore consider consolidating your pensions, or transferring them to J.P. Morgan Personal Investing, to make it easier to manage your retirement planning. This will potentially reduce the amount of paperwork and administration that you have to do. You may even be able to save on fees.
Before making any decisions about leaving or transferring from your workplace scheme, it's important to carefully consider the potential implications. Workplace schemes often provide specific valuable benefits and protections that may not be available in other arrangements including employer contributions, guaranteed benefits, or other unique features. Also, consider any long-term impacts of how transferring might affect your long-term financial security, including retirement income and potential tax implications.
8. Pensions fees and charges
There can be a number of different fees and charges associated with your pensions. These generally cover the cost of the pension provider administering and managing your pension scheme, and the costs of investing your contributions.
Speak to our wealth experts
This guide is in-depth, but if you have any questions, you can speak to one of our experts for free via our guidance service. If you want advice that is tailored to your needs, you can speak to one of our qualified wealth experts via our financial advice service, and receive a fully personalised recommendation on your finances. Bear in mind, however, that they can only advise on J.P. Morgan Personal Investing products and services.
Risk warning
As with all investing, your capital is at risk. The value of your portfolio can go down or up and you may get back less than you invest. If you are unsure if a pension is right for you, please seek financial advice. Pension and LISA eligibility rules apply. With LISAs, government withdrawal charges may apply. Before transferring, check you won't lose any benefits or pay any unexpected charges. During a transfer, your investments will be out of the market. Seek financial advice if you're unsure if a transfer is right for you. Tax rules vary by individual status and may change. This is general information, not personalised tax advice.