How pension contributions work

In this section we will cover:

• How pension contributions are deducted and invested in your pension
• How our fees work

How pension contributions work

In a workplace DC scheme, a percentage of your salary will normally be contributed into your pension by salary sacrifice. This means that tax relief is automatically included in your personal contribution. In most cases, your employer will also contribute to your pension and some employers might match up to a percentage of what you contribute to a pension scheme.

With a personal pension, you make these contributions yourself and 20% tax relief is usually claimed on your behalf by your pension provider until age 75, while some employers may also offer the option of contributing towards your personal pension.

In both workplace DC schemes and personal pensions, your contributions are then invested by your pension provider into assets, such as company shares, bonds and property in line with your investment instructions.

The mix of these investments can change over time. Younger pension savers are typically invested in a higher proportion of riskier assets – usually equities – while this asset allocation will often shift towards safer assets that pay income, like bonds, as people approach retirement. This is because the further you are from retirement, the more time there is to accumulate returns and make up for falls in the value of your pension.

There are other benefits, such as:

• You do not need to pay Capital Gains Tax (CGT) on returns.
• Tax relief on personal contributions up to 100% of earnings or your annual allowance of £60,000 – whichever is lower – as long as you are aged below 75 and a UK tax resident.
• Some workplace pension providers might allow you to make direct contributions into the scheme and 20% tax relief will be applied by the pension provider.

J.P. Morgan Personal Investing offers multiple investment styles for our pension product, which can be adjusted for customers depending on their attitude to risk and their selected retirement age. It's worth noting that your capital is at risk and that the value of your pension can go up or down.

Personal pensions can grant savers more control over their investments

If you’re already enrolled in a workplace pension, you may question the need to have a separate personal pension.

Workplace pensions and personal pensions both have merits and can be used in tandem. A personal pension offers the ease of consolidating pensions into one place, in a world where people move regularly between jobs. It can offer more choice and control over your investments than in a workplace pension scheme, where most savers will be enrolled in a ‘default’ fund. That said, you should consider the benefits of staying enrolled or enrolling in your occupational pension scheme. If you choose to opt out, you could lose out on valuable benefits. Workplace pensions offer a default strategy but can also offer a list of funds to choose to invest in.

If you are self-employed, you will need to take control of saving for your retirement, be that through a personal pension or another savings vehicle. J.P. Morgan Personal Investing makes it straightforward for you to choose how you invest for your retirement, regardless of your employment status.

Investment income and gains are tax exempt within your pension. However withdrawals from your pension may be taxable as income.

Is there a fee?

We don’t charge you anything to join J.P. Morgan Personal Investing. But we do charge fees to cover the costs of managing your money, which depends on your pot's value and investment style, plus the cost and market spread of the funds we buy into for you. The market spread is the difference between the price to buy and the price to sell assets.

Our management fees are automatically deducted from each individual pot in your J.P. Morgan Personal Investing account, so there's no need for you to make any extra payments to cover fees. We aim to do this on the first working day of each month. You can check the app or log in on our website to see how much you're paying.

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. Pension eligibility rules 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 pension or transfer is right for you. Tax rules vary by individual status and may change. This is general information, not personalised tax advice.