An individual personal pension (IPP) is one that you set up yourself. It is a private pension held in your name and invested on your behalf. You will pay into it throughout your working life in order to build up a pension fund for your retirement.

When you retire, you can take up to 25% of the value of your fund as a tax-free lump sum. The rest of your fund is used to provide a regular income.

Pros

• They are easy to set up and control.
• You can pay regular amounts each month as well as making one-off additional payments as and when you are able to.
• Your employer is able to pay directly into the plan, if they wish to do so.
• It is possible for anyone to pay money into your pension fund, so family members could make payments as well if they wanted to.
• There is usually a wide selection of funds available to invest in.
• You can take a lump sum at retirement as well as receive an income.
• You can take benefits from the plan from the age of 50 if you reach this age before 6 April 2010 (the minimum age will be 55 from this date).
• Your widow, widower, civil partner or other dependants may receive an income in the event of your death, or if you die before retirement and before age 75, they may get a tax-free lump sum.

Cons

• If you move to a company that has their own pension scheme they may not be prepared to pay into your personal pension as well.
• Charges may be higher than under a stakeholder pension.

If you cannot, or do not, pay into an occupational pension scheme then you should think about a personal pension. Alternatively if you want to top up your existing company pension and take advantage of increased investment choices then this, or a stakeholder, may be a good option for you.

Individual Personal Pensions are available through financial advisers or direct from pension providers, usually via the telephone or internet.  If you're not sure, get advice before buying a personal pension.

If unsure, get advice – If you are unsure about any aspects of pensions or what type may be suitable for you, it is best that you speak to a financial adviser, who will be able to assess your needs and recommend the most suitable products.

Act sooner rather than later – The earlier you start to pay into a pension the greater the income you should receive when you retire.