The Personal Pension for Beginners

Published February 8, 2018
A Personal Pension offers guaranteed retirement income that lasts as long as you. Here's how the Personal Pension works.
  • The Personal Pension is guaranteed by one or more (you choose which and how many) life insurers with a financial strength rating of at least A
  • While a 401(k) is a good retirement saving tool, it doesn’t protect against longevity risk
  • Blueprint Income chooses to act as a fiduciary, which means your best interest is our best interest

Understanding the Personal Pension: What You Need to Know

A Personal Pension is a contract between you and top rated insurance companies. Before you enroll, you decide how much income you need every month in retirement and at what age you want it to start. This Personal Pension guarantee ensures that lifetime annuity income is available to you and is made possible by the pooling of risk across millions of Americans.

By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed income available in retirement. But what if you can’t always keep up your end of the contract? The good news is that you can change your contributions at any time, and the insurance company will adjust how much income you will receive. Whatever you’ve been able to accumulate by your income start age will be paid to you by the insurance companies for the rest of your life.

How the Personal Pension Guarantee Is Possible

You are probably thinking, “How can an insurance company guarantee me a check in my mailbox that will continue for my entire life?” Your guaranteed income is a promise that the insurance company is contractually obligated to fulfill. They use actuaries to calculate life expectancies and determine the cost today of a guarantee for the future. The insurance company “wins” when someone winds up living less less than an average lifespan, and “loses” when they fulfill policies to people with above average lifespans (use our life expectancy calculator to see your expected lifespan). By pooling together millions of these contracts, the insurance company can promise all of its customers guaranteed income. They know how much they will be receiving in contributions and have a very good idea of how much they will have to pay out.

What’s most important to understand here is that an insurance company — because of its size and business model — can handle these risks in a way that an individual cannot. If you want more information about how your income will be guaranteed, Blueprint Income has an actuary on the team – Lauren Minches, as well as a Certified Financial Advisor – Nimish Shukla, who can answer any questions you have!

The Personal Pension vs. The 401(k)

We hear a lot of our customers ask us how this plan differs from their 401(k). With your 401(k), you hope that the money you contribute every month will grow in the stock market – which it often does. But, there are no promises in the market as we all saw in 2008. With a Personal Pension, you are guaranteed an annuity income amount for the rest of your life completely independent of the state of the market – good or bad.

We think that you should always hope for strong market returns with your 401(k), but guarantee yourself a safe, unchangeable amount of income to be the core of your retirement budget. That way you can sleep at night knowing you will never run out of money, but you won’t have to miss out on the all-time high market we are seeing today.

Here are some FAQs to round out your understanding:

  1. How is the Personal Pension possible? The Personal Pension provides a guaranteed and pre-determined amount of monthly annuity income. Every time you put money in, you increase the size of your future monthly paycheck.
  2. How’s it different from a 401(k)? A 401(k) invested in the market provides no guarantee of what kind of lifestyle/spending level you’ll be able to afford. This is exactly the opposite — it’s a monthly income stream that’s guaranteed to continue as you’re alive. Learn more.
  3. How’s it guaranteed? Glad you asked. It’s guaranteed by one or more (you choose which and how many) life insurers with a financial strength rating of at least A. The guarantee is subject to the claims-paying ability of the insurer, so it’s important to keep the insurer in mind as you compare payouts. Learn more.
  4. Is it just like an annuity I can find elsewhere? No. Many insurers provide access to guaranteed lifetime income from a simple deferred income annuity. But it’s historically been impossible to purchase in small pieces over time, shop digitally, and manage your account all online. That’s what we do. Think of us as your personal guide that likes to be just as digital as you are. Learn more.
  5. So what’s our role in all this? We’re not the insurer. We provide you access to the insurers. We can provide you access to the entire market without the same kind of a conflict a captive insurance agent or even most financial advisors would have. Your best interest is our best interest. Learn more.

How Can I Start a Personal Pension?

A Personal Pension is a contract between you and top rated insurance companies. By making contributions to your Personal Pension over time, you develop a portfolio of guaranteed annuity income available in retirement. Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check.

Here you can see what contributing to a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.

You can continue with the enrollment process on your own or fill out the information to have one of our specialists follow up with you by starting with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.

Interested in learning more about retirement and the Personal Pension? Sign up here to be on our newsletter.
Lauren Minches

Lauren Minches

Financial Planning Professional

Lauren is an actuary by training with expertise in retirement, finance, and risk. She writes about annuities to make them easier to understand and evaluate. Her goal is to help people create retirements with more time for living and less time thinking about money.