You pay contributions in, get tax relief on them, and at the end, get a pension. Personal pensions are always money purchase ones, where your eventuall pension is not guaranteed and depends on stock market performance over the years. With profits pensions put your money into a fund along with that of other people. Managers add bonuses to your pension each year in such a way that in good years, some of the bonus is held back to top up return in bad years. The effect is to smooth the returns.
Unit linked policies go straight into the stock market.
They are thus riskier, but offer the chance of a higher pension , and make more sense the younger you are. Check on how much you re allowed to contribute by checking our tax tables . You can draw your pension at any time after age 50, although sometimes you will have to state an age and face penalties if you change it. The earlier you draw the pension ,the less will be in the pot and so the smaller will be the income. People planning to retire early should pay as much into their scheme as possible , and one common calculation suggests that for every 10,000 of pension a year you will need a final find of 100,000.