Myth Busters: Pension Assumptions that are actually False

havenifa

havenifa


Posted on: 17th Apr 2019

With so many developments in the pension industry, separating fact from fiction can be a bit of a brain buster! Not to worry, the team at Haven IFA are here to break down some common pension assumptions that are actually false!

A workplace pension isn’t worth it

This really isn’t true! You may believe that a workplace pension isn’t building up to anything towards your retirement, but this isn’t the case. In fact, most people receive more back than they contributed. They also receive contributions from their employers!

Your property can provide your pension

Solely relying on your pension to fund your retirement isn’t always the smartest move. Why? Well, you will still need somewhere to live! When it comes to it, not everyone wishes to downsize or leave the area they have spent many years building a life. Many also choose to keep their property to pass on as an inheritance to their loved ones. By building your pension savings, you will have more choice for retirement. Downsizing is an option but should not be something you have to do.

It’s too late to start a pension

While it may be more difficult to save for your pension later on in life, this doesn’t mean that all hope is lost. Pension saving at any age pays off for two reasons. The first is that if you opt out, you will miss out on “free money” in the form of a contribution from your employer. Secondly, saving into a pension is probably the most tax efficient way to save. As soon as you turn 55, you can withdraw all of your pension savings as cash (if you want to, this is optional). 25 per cent of this will be tax-free. You can learn more about saving your pension later on in life here.

I’m too young to start a pension

There is no starting age for when you can begin to save for your pension. Of course, if you are employed, you will only be automatically joined to the company pension from the age of 22. However, if you wish to join earlier, all you need to do is ‘opt-in’. And there’s nothing wrong with putting some extra pennies aside on top of that!

I can’t afford to save for a pension

We understand that many are already stretching their current paycheques and that pension savings don’t seem possible. However, it’s important that you consider what you will miss out on in the future if you choose to opt out of your company pension scheme. With auto-enrolment, even if you opt out, you will be re-enrolled again every three years. This could be the amount of time you need for your financial situation to pick up.

My pension will be lost if I die before retirement

This isn’t true either. At the end of the day, your pension savings belong to you. If you want to make sure that your beneficiaries can claim any of your pension, check out this article by the Money Advice Service. This will give you and your beneficiaries peace of mind.

The State Pension will be enough for my retirement

The state pension is not enough for most people to retire on, especially if they want to live comfortably. This is why it is important that you have your own pension savings.