Word of the Day
Personal Pension Plan
A private pension scheme, mostly offered by insurance companies, that enjoys tax relief on contributions into it. The amount of tax relief increases the older you are. When you've reached the minimum retirement age - 55 for personal pensions - you can use the pension fund to buy an annuity and take up to 25% of the fund as a tax-free lump sum.
Personal pensions became notorious after they were mis-sold by unscrupulous salesmen and financial advisers who persuaded people in perfectly decent company pension schemes to transfer to PPPs, many of which weren't in any way suitable for people's needs. High front-end charges also meant that contributions were eaten up in the early years, so that investors wanting to transfer to another provider were quoted miniscule transfer values. The Financial Services Authority, the chief regulator, is still dealing with the compensatory implications of this mis-selling scandal. Having said all this, providing you know what the costs are, they can be useful products.