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Personal pension vs. workplace pension - What’s the difference?

In the UK, most workers have a workplace pension. But did you know that workplace schemes aren’t the only way to save for retirement? Personal pensions can help to boost retirement savings, and come with significant tax advantages. 

Here’s what you need to know about personal and workplace pensions, and why having both could be an advantage.
 

Personal and workplace pensions - Key differences at a glance

Workplace and personal pension schemes have several differences, but here are the most important ones to understand.

Setting up your pension
Employers set up workplace pensions, whereas individuals set up their own personal pensions. 

Contributing to your pension
Both you and your employer usually contribute to a workplace pension, while typically only you pay into your personal pension (and the government tops up your savings through tax relief).

Control and flexibility
Workplace pension schemes are typically chosen by your employer, though you can usually choose how your money is invested within it. Personal pensions often give you more control over how your money is invested, including the types of funds and level of risk you take on. 
 

Workplace pensions

Around 82% of UK workers were members of a workplace pension scheme in 2024. Let’s explore how they work and what they could mean for your retirement.

What is a workplace pension?
A workplace pension is a pension scheme that both you and your employer pay into. By law, employers in the UK must enrol eligible employees into a workplace pension scheme (it’s a little different for people earning less than £10,000 a year and self-employed people – we’ll cover both cases later on in this article). 

This process is known as auto-enrolment. By default, you’re opted into a pension scheme and a minimum 5% of your qualifying earnings are automatically deposited from your regular paycheck. Your employer is required to top this up by at least 3%, bringing the total minimum contribution to 8%.
Qualifying earnings

The qualifying earnings band is between £6,240 and £50,270 each year, and workplace pension contributions are usually calculated based on earnings within this range.

Why do employer contributions matter?
3% of your annual earnings might not sound like a lot, but over time, that employer contribution can really add up. By topping up your pension, your employer is effectively giving you extra money towards your retirement.

Plus, some employers offer higher pension contributions as an employee benefit – so it can be well worth paying attention to the options available to you in your current role or when applying for a new job.

Defined contribution vs defined benefit pensions
Today, most employers offer defined contribution pensions – that means the amount of pension income you receive in retirement will depend on how much you and your employer contribute into your workplace scheme, as well as how your investments perform over time.
Though less common, some employers offer a defined benefit pension, which provides a guaranteed income for life, often linked to inflation. The amount is usually determined by your final salary or average career earnings.

Lower-income workers
If you earn less than £10,000 a year, your employer doesn’t have to automatically enrol you into a workplace pension scheme. But, if you earn between £6,240 and £10,000 and choose to opt in, your employer must make contributions to your pension.
If you earn less than £6,240, you can still choose to sign up for a workplace pension but your employer isn’t legally obliged to make contributions. 
 

Personal pensions

In 2023/24, a record £14.6bn was contributed to personal pensions across the UK. But how do personal pensions work, and should you open one? Let’s discuss.
What is a personal pension?

A personal pension is a pension that isn’t linked to your workplace or employer. You may have heard of a SIPP, which stands for ‘Self Invested Personal Pension’ - this is a common type of personal pension. Unlike a workplace pension, you need to set up a personal pension yourself. 

Personal pensions are optional. There’s no legal minimum contribution amount, but some providers may require minimum monthly contributions or charge a management fee. It’s a good idea to check the provider’s full terms and conditions before signing up.

Who could benefit from a personal pension?

Self-employed people can benefit from a personal pension as it allows them to save for retirement without relying on an employer. While the self-employed don’t receive employer contributions, personal pension contributions are eligible for tax relief, which can help them to boost their savings.

People with a workplace pension can also open a personal pension – in fact, this can be a powerful way to supplement retirement savings, invest flexibly and gain greater control over their finances. Many people save into a workplace pension and personal pension at the same time.

Personal pensions and defined contributions

Almost all personal pension schemes in the UK – including SIPPs – are defined contribution pensions. Just like with a defined contribution workplace pension, the amount you receive in retirement will depend on the amount you contribute, and how your investments perform over time.

Personal pensions and tax relief - how does it work?

For every £80 that a basic-rate taxpayer contributes to their personal pension, the government effectively tops it up to £100 through tax relief. Higher- and additional-rate taxpayers may be able to claim further tax relief at the end of each tax year via their self-assessment tax return.

Tax relief can make saving into a personal pension an appealing option for those who want to grow their retirement savings. However, it’s important to note that rules around tax allowances can change, and that pensions are investments – their value can go down as well as up, and your contributions may be worth less than what you put in. 

In 2023/24, a record £14.6bn was contributed to personal pensions across the UK. But how do personal pensions work, and should you open one? Let’s discuss.

What is a personal pension?

A personal pension is a pension that isn’t linked to your workplace or employer. You may have heard of a SIPP, which stands for ‘Self Invested Personal Pension’ - this is a common type of personal pension. Unlike a workplace pension, you need to set up a personal pension yourself. 

Personal pensions are optional. There’s no legal minimum contribution amount, but some providers may require minimum monthly contributions or charge a management fee. It’s a good idea to check the provider’s full terms and conditions before signing up.

Who could benefit from a personal pension?

Self-employed people can benefit from a personal pension as it allows them to save for retirement without relying on an employer. While the self-employed don’t receive employer contributions, personal pension contributions are eligible for tax relief, which can help them to boost their savings.

People with a workplace pension can also open a personal pension – in fact, this can be a powerful way to supplement retirement savings, invest flexibly and gain greater control over their finances. Many people save into a workplace pension and personal pension at the same time.

Personal pensions and defined contributions

Almost all personal pension schemes in the UK – including SIPPs – are defined contribution pensions. Just like with a defined contribution workplace pension, the amount you receive in retirement will depend on the amount you contribute, and how your investments perform over time.

Personal pensions and tax relief - how does it work?

For every £80 that a basic-rate taxpayer contributes to their personal pension, the government effectively tops it up to £100 through tax relief. Higher- and additional-rate taxpayers may be able to claim further tax relief at the end of each tax year via their self-assessment tax return.

Tax relief can make saving into a personal pension an appealing option for those who want to grow their retirement savings. However, it’s important to note that rules around tax allowances can change, and that pensions are investments – their value can go down as well as up, and your contributions may be worth less than what you put in. 
 

Can you have a workplace pension AND a personal

The answer is yes – and in fact, it’s increasingly common. When it was introduced, the minimum 8% contribution rate set out in auto-enrolment legislation was intended as a starting point, not a target. Saving just 8% of annual earnings is unlikely to be enough for most people to maintain the lifestyle they want in retirement. 

Many people looking for ways to top up their pension find that using a workplace pension as a foundation and a personal pension as a supplement gives them greater flexibility and more control over their retirement savings. 

Things to consider in 2026

No matter whether you have a workplace pension, a personal pension, or you’re just considering your options,  there are a few things to keep in mind that may help improve your financial circumstances in retirement. 

Changing jobs and managing multiple pots

When you change jobs, your new employer is likely to sign you up for a new workplace pension scheme. It’s easy to lose track of old pensions. In the UK, over £31bn is currently sitting in lost or unclaimed pension pots. 

If you’re changing jobs this year, make sure to keep a record of your workplace pension provider. And before you leave, remember to update your contact details so your provider can stay in touch about your pension pot. If you have multiple pension pots – or you’re wondering whether you’ve forgotten about one – MoneyHelper has a helpful guide to tracing old or lost pensions.

Rising access age

Currently, you can start accessing money from a defined contribution pension at age 55. That age is set to increase to 57 in 2028. If you’re planning for retirement, it’s worth factoring in this change to avoid surprises later on. 

Saving enough for retirement

With the cost of living continuing to rise, some people may need to save more than they expect to achieve the lifestyle they want in retirement.

Planning ahead, assessing your regular contributions, and reviewing all your options – including saving into a personal pension plan – can all make a big difference when you reach retirement age. 

If you’re feeling uncertain, or just want some guidance, it can be well worth speaking with a financial advisor who can help you understand your options. If you don’t have a financial adviser, you could find one at Unbiased.co.uk.

 

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The information here is based on our understanding in June 2026 and shouldn’t be taken as financial advice.

A pension plan is an investment. Its value can go down as well as up and could be worth less than was paid in.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.

Standard Life accepts no responsibility for information on external websites. These are provided for general information.