What Are The Best Retirement Plans Of 2024?

All the essential things you need to know about investing in a retirement plan.

Updated: May 22, 2024
Matt Crabtree

Written By

Matt Crabtree

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Given that the average life-span of the general population is getting older, retirement savings are more important than ever.

By creating a pension plan, you will be securing your future financial stability, while ensuring a stress-free, comfortable retirement.

From small business owners, to freelancers, anyone can and should have a pension. If you are interested in kick-starting your retirement savings, be sure to keep reading…

The Compare Banks team have constructed this detailed guide to outline all the important things you need to know about investing into a retirement plan, as well as a curated shortlist of the best retirement plans of 2024, so that you can effectively map out your future finances.

1. Interactive Investor★★★★★Click Here
2. AJ Bell★★★★★Click Here
3. Bestinvest★★★★★Click Here
4. Hargreaves Lansdown★★★★★Click Here
5. Penfold★★★★★Click Here
6. PensionBee★★★★★Click Here
7. Wealthify★★★★★Click Here

When Should You Begin Saving For Your Retirement?

If you are young, your retirement may seem like a lifetime away. However, this does not mean that you shouldn't begin saving now. It's important to acknowledge that the earlier you begin investing in your future, the more money you will have during your retirement.

So, what age should you begin your retirement plan? It is widely recommended that you begin saving in your 20s to ensure you minimise the burden of having to frantically invest your finances as you draw closer to your retirement.

It is understandable that you want to spend more than save during your younger years.

Thankfully, there are many retirement plans which do not have any contribution limits, meaning you are not required to invest a huge initial lump sum of cash, as many plans allow a £0 minimum investment to open an account.

The Main Benefits of Having A Retirement Account

Retirement accounts are considered the most effective tax-free ways that you can grow your money overtime. There are hundreds of fantastic benefits that you can receive from planning your retirement savings. To illustrate just how valuable retirement planning is, we have shortlisted 5 major benefits:

1. Promoted Financial Security

When you eventually stop receiving money from work, life can become more unpredictable. Creating a pension plan will ensure you receive a guaranteed income, so that you are financially supported once you retire from working.

This will effectively provide peace of mind as you will have a sufficient amount of money saved to support you during your retirement, protect your property and assets, and have enough finances which can be used for any financial emergencies.

2. Tax Benefits

Personal pensions offer the tax benefit of tax relief. This means that the amount you invest into your retirement pot is exempt from getting taxed by the government, meaning you will have more money for you to enjoy later on, and your taxable income will be minimised. But it doesn't stop here – you can also receive tax benefits once you retire!

Once you hit your retirement age (55 being the earliest) you will have the ability to withdraw 25% of your retirement funds without having to pay taxes. After this, your remaining money will be transferred to you and taxed at a regular rate.

Important Note: The rate at which your pension funds are taxed are completely subjective to how much income you have available in your retirement account, in a year.

3. Opportunity To Retire Early

The idea of not having to work sounds pretty appealing, especially if you have dedicated most of your life to working hard. If you set aside cash early on, and are smart with your finances, you could potentially look at an early retirement.

4. Gain Investment Earnings

When you invest cash into your retirement account, compound interest will be added, helping your money grow and increasing your returns. Here's an outline of how it works:

  • Year One: You will receive interest returns on your first contribution.
  • Year Two: You will earn interest on your first contribution and the first-year return,
  • Year Three: Your money will continue to steadily grow as you gain interest on your first contribution, plus the two years of returns you have already accumulated, and so forth.

5. Flexibility

There are many ways that personal pensions, in particular, are championed for their flexibility. First, these investments are easily portable, meaning if you lose your job or begin working somewhere new, you can still continue to contribute money into the same plan. 

You can additionally receive contributions from third parties such as your employer, friends and family.

How To Choose The Right Retirement Plan For You

Before you settle on a retirement plan, you must look into certain factors in order to determine which scheme best suits you. For instance, analysing various strategies, limitations, fees, and so on.

Self-employed individuals should open a private pension, and seek a personal pension provider and plan in line with specific requirements and needs. Those contracted to an organisation will probably have a workplace pension, and won't have to worry about selecting a provider themselves, as their employers choose on their behalf.

If you happen to be searching for a pension plan and suitable provider, you should prepare by asking yourself the following questions:

  • Are there any contribution limits? Is there a minimum or maximum payment required on your behalf?
  • How trusted is the provider you are choosing? How have they performed in the past?
  • How often can you pay? (For example, monthly or annually)
  • Is the pension fund adequately diversified, in order to reduce risks?
  • What are the hidden charges and exit fees? (Always check the fine print)
  • How do you wish to access and manage your account? Can you check your balance online?

Planning Your Retirement As A Small Business Owner

By setting up a pension plan, small business owners can protect their future and ensure they enjoy a steady and uncomplicated transition into retirement for themselves and their employees.

The majority of small business owners will secure their retirement savings with a small self-administered scheme (SSAS). This type of plan is a trust-based pension with unlimited employer contributions, meaning you have the flexibility to invest as much as you want and distribute money within a pension pot, as you please.

This is particularly helpful for small business owners, as it allows them to make investments as they please and lend money, with no obligation to pay taxes (subject to certain factors). Small business owners may additionally set up an SSAS for employees.

Understanding The Different Types Of Retirement Plans

With so much information to grasp, planning your retirement can be complicated and daunting. However, we have designed this section to make understanding retirement easier. Continue reading to familiarise with all the different ways that you can build your retirement income.

Although there are many different types of retirement plans, they all typically fall under these 3 schemes:

1. Defined Benefit Plans

Defined benefit plans (also referred to as career average schemes and final salary schemes) determine the amount you are paid based on your earnings, how long you worked for your employer and the nature of your membership within the retirement plan.
This plan is a type of workplace pension (the UK equivalent to an American 401 k retirement plan).

Although this retirement plan is becoming more and more uncommon, it still poses the key benefit of guaranteeing a lifelong income, plus a tax-free lump sum of cash, which will reduce the amount you pay in taxable income.

The major downside of a defined benefit plan is that they may not grant you the flexibility to retire at your desired age, as benefits usually become available between the ages of 60-65.

Employer-Sponsored Retirement Plans

Employer-sponsored retirement plans are a form of workplace pensions which are focused upon providing a range of benefits, such as a health savings account (HSA), to an employee on behalf of an organisation.

The main reason that employer-sponsored retirement plans are popular is because benefits are issued at a notably low cost, or at no cost at all.

Employer-sponsored retirement plans work for both sides. On one hand, employees who enrol in these programs receive discounted services, allowing them to capitalise on their benefits. 

On the other hand, employers that are offering these schemes often receive tax benefits (such as tax breaks) and retain employees who are considered valuable to their organisation.

Another reason these plans work well is because of employer contributions. It is common for employers to match a specific portion of employee contributions. For instance, an employer may match up to 3% of employee contributions to assist with a retirement plan.

2. Defined Contribution Plans

Occasionally called a ‘money purchase' retirement plan, defined contribution plans are the most common pension plans for people setting up their retirement. A DC plan can be either be set up by yourself or by your employer.

These operate by paying an agreed amount of cash into your pension (usually monthly) by you, your employer or in some instances, a combination of both.

If you set up your pension yourself, your contributions will likely be from your after-tax money. In order to give you tax relief and reduce your taxable income, your selected provider will claim back money in line with the UK's standard tax rates from HMRC, and then reimburse this into your pension pot.

Important Note: The pension capital that you will eventually receive is dependant upon the amount of money you have paid in, the performance of your pension funds, and any charges that may be applied.

Self-Invested Personal Pension

A self-invested personal pension (SIPP) is a type of defined contribution plan is a type of DC scheme that provides various investment avenues, such as holding individual stocks, shares and alternative assets. This retirement plan is best suited to those who are self-employed or small business owners.

Many people are choosing SIPPs as they offer flexible methods of saving money for retirement. If you are keen on making investments choices, then this pension plan is likely ideal for you.

3. State Pensions

Once you are the State Pension age (currently 66), you are entitled to claim your State Pension. In line with the current law, you can receive the full State Pension after 44 qualifying years of contributing toward National Insurance.

Alternative Types Of Retirement Plans

Now that you have familiarised with the main retirement plans that are out there, it is worth further broadening your knowledge by looking into these alternative strategies:

  • Individual Savings Account (ISA): While many assume that an ISA is meant for saving up for a house, they also make great pension plans. ISAs are often recognised as the UK equivalent to individual retirement accounts (IRA), which are popular pension plans throughout the US. This is because ISAs can be flexible, reasonably straightforward and do not require you to pay taxes, or capital gains from any assets you have within your account. If this sounds good to you, check out and compare some of the UK's best savings accounts!
  • Pension Mortgage: A pension mortgage involves paying capital repayment instalments into a pension fund, while the interest goes into your mortgage. This payment scheme is celebrated for being impressively tax-efficient as it enables you to pay off your mortgage with the tax-free savings in your pension pot.
  • Investing In Assets: If you are keen about investing, you may choose to invest in things like stocks, bonds, mutual funds, and so forth, in order to accumulate extra cash for your retirement.

7 Best Retirement Plans of 2024

Now that you understand what types of retirement plans are out there, it's time to compare and consider different providers. At Compare Banks, we are passionate about helping people discover their most suitable banking and finance options. That's why we have created this list of the best retirement plans for this year.

Important Note: When you invest in a pension, your capital may be at risk. Pension rules may additionally apply.

1. Interactive Investor

  • Which? recommended (2022)
  • Allows you to open a SIPP without paying any fees for your first 6 months
  • No joining fees and it's free to leave
  • Self-select account

2. AJ Bell

  • Which? recommended (2022)
  • Free to open A SIPP
  • Invest for as little as £1.50
  • Annual charge for holding investments never exceeds 0.25%
  • DIY & ready-made account

3. Bestinvest

  • Beginner-friendly
  • Both regular SIPPs and Junior SIPPs available
  • No contribution limits
  • Annual charge is 0.4%-0% for DIY and 0.2%-0% for ready-made

4. Hargreaves Lansdown

  • DIY & Ready-made retirement accounts
  • SIPP accounts available
  • Contribution limits: £100 lump sum or £25 a month
  • Annual charge is between 0.45% – 0%

5. Penfold

  • Ready-made retirement accounts
  • SIPP accounts available
  • Visibility of retirement savings through their easy-to-use digital platform
  • No contribution limits
  • Annual charge is between 0.88% – 0.75%

6. PensionBee

  • Ready-made retirement accounts
  • Transfer one or more pensions to your online plan
  • Check your retirement savings at anytime
  • No contribution limits
  • Annual charge is between 0.28% – 0.95%

7. Wealthify

  • Ready-made retirement accounts
  • Option to combine your old pensions or begin a new pot
  • Ethical pensions available
  • Contribution limits: £50 minimum contribution
  • Low annual charge (0.6%)

How Does Pension Tax Work?

Unfortunately, your retirement money is not tax free and will be treated like any other taxable income. This is because you don't technically own all the money sitting in your pension pot, as retirement schemes work differently to banks.

To simplify this further, when you are paid your pension money, it is treated like an ordinary wage being paid into your bank account.

When you begin receiving your pension income, you will be obligated to pay 20% income tax on any income you receive that is between £12,571 to £50,270.

How Much Is Tax-Free?

Looking into a more positive light, a portion of your pension will be tax-free. You have full entitlement to claim up to 25% of your pension money, free of tax. This works by either taking small increments of your savings, with 25% of each portion of money being tax-free, or by withdrawing a quarter of your retirement savings in one lump sum.

How To Identify Your Annual Retirement Income

The best way of planning a comfortable retirement is by having a specific figure in mind that will sufficiently support you during your work-free days of relaxation. In the UK, the average weekly income for retired individuals is around £304 after tax deductions and housing costs – this figure is approximately £15,080 each year.

Of course, certain factors, such as where you live, your marital status, and so forth, will affect how much retirement income you are paid.

Using a free online pension calculator will help you create an accurate estimate of how much retirement income you could receive each year. This will also make planning your retirement easier because you can set realistic goals and even build a suitable framework to structure how much you can set aside a year.

Alternatively, once you set up an account, your provider will send you end-of-year pension statements which will outline the performance of your investments, and how much you have in money or benefits.

How Much Money Do You Need For A Comfortable Retirement?

The Retirement Living Standards, owned by The Pensions and Lifetime Savings Association (PLSA) suggest that retirement costs are segmented into three thresholds:

  1. Minimum: Covers your essential needs with a little on the side for leisurely activities. Singles receive £10,900 and couples receive £16,700.
  2. Moderate: A healthy amount of financial security and enough flexibility for leisurely activities. Singles receive £20,800, and couples receive £30,600.
  3. Comfortable: A larger amount of financial security, and financial freedom to enjoy luxuries. Singles receive £33,600, and couples receive £49,700.

How Much Should You Really Be Saving?

On average, retirees throughout the UK have around £55,900 sitting in their pension pots. Many people tend to experience shock when they realise that their lifetime savings may not adequately support them during their retirement. Here's a more realistic example of how much you should aim to save:

If you qualify for the current full State Pension (£9,627.80 per year), the PLSA advises you accumulate a minimum of £590,000 in your pension pot, in order to enjoy a ‘comfortable' retirement.

If you are feeling unsure or overwhelmed about building a sustainable pension pot, it may be worth consulting with a financial advisor, to gain some expert advice on how you much you need to set aside for your pension.

A Step-By-Step Guide To Saving For Your Retirement

Whether you have just landed your first job, or have already been working for most of your life, following this handy step-by-step guide will point you in the right direction and help you navigate towards a strong retirement plan.

Step 1: Choose A Pension Scheme & Provider That Suits You

After reading the above areas which cover existing pension schemes and the best providers of 2024, you should have all the knowledge needed to determine what plan is ideal for you. Before settling on any provider, be sure to create a shortlist of your top options and compare the qualities of each, in order to assess which is best suited to you.

Step 2: Save What You Can Afford

Because pension plans restrict you from withdrawing money whenever you want, it is important that you only invest what you can afford to. It may be worth compiling a spreadsheet of all your essential living expenses, in order to determine what percentage of your income should go into a retirement account.

Step 3: Regularly Check On Your Retirement Savings

Conducting routine checks on your retirement savings will help you keep track of your money and determine whether you need to be doing anything differently. If you have concerns regarding the performance of your finances, you should seek advice from a professional advisor.

If you think you have wiggle room to set aside some extra cash, don't hesitate as you will only better your future situation.

Step 4: Take Care Of Any Debts

Contrary to popular belief, you can still gain a pension plan if you are in debt, however, it is best avoided. Sorting out any money you owe before you stop working will guarantee that you can soak up an easy-going retirement with no added stress.

Step 5: Create A Will

In case anything happens to you, it is advisable to create a will in order to pass on your assets and finances to whomever you want. Any money that is untouched within your pension pot will also be given to your desired person.

Step 6: Create A Budget For Your Retirement

Once you understand how much money you need for your retirement, it is incredibly important to create a budget. This will help you to appropriately distribute your retirement money on living expenses (such as food and drink, housing bills, leisurely activities, and so on).

The Bottom Line

Drawing to a close, we would like to reiterate that it is never too early to begin investing money for your retirement. Creating a pension is one of the most responsible things you can do for yourself, financially. The cash you set aside now will go a long way in ensuring you get some well-deserved relaxation after years of working. Your future self will certainly thank you!

If you found this article helpful, we invite you to discover our entire range of investment-related articles and our thoughtful guides, which have been individually constructed to provide straightforward advice.

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