Debunking pension myths

Pensions, most of us have one, some of us have several but how many of us really understand why we need one or how they work?  

There is so much jargon surrounding pensions that even understanding the type of pension pot we have is not straightforward forward, which can make us ill-equipped to know how to get the most out of our pension savings. When even understanding the pension basics can prove difficult, how can we then be expected to decipher the pension facts from pension fiction?  

Are pension pots and saving accounts the same? Can you only easily transfer pensions if they are all closed? Is one pension enough? The questions are endless, so where do you start with understanding the truth about pensions so that you can take your first step on your retirement journey?  

Well fear not as we are going to provide you with a quick rundown of the five most popular assumptions made about pensions and hopefully debunk some myths so you can start to have more control over your retirement plans:  

1. I will lose my pension if my employer goes out of business 

False –All pensions are protected in various ways (depending on the type of pension) and many are protected by the Financial Services Compensation Scheme (FSCS). Your pension is in your name and is always held by a third party (e.g. a pension provider) meaning your pension savings are held separately.  

2. I have a State pension so I don’t need any other pensions  

False – The age at which you are eligible to take your state pension has been steadily increasing over the years and it is predicted to continue to rise. Most pensions can be taken from the age of 55, granting many people much more flexibility with their retirement in addition to giving security that the income you require to enjoy your retirement will be available in a way the state pension is unlikely to be able to accommodate.   

3. It isn’t worth saving into a pension  

False – The consensus is that most people will put less into their pension than they end up getting for their retirement. Also, the introduction of autoenrollment means that most people are now offered a workplace pension in which their employer will also contribute a % to their retirement – that’s free money!  

4. I own property so don’t need a pension 

False – Pensions have a number of tax perks that the selling of property does not offer in addition to a pension providing you with the option to spread your money across different investments that could provide a greater return.   

5. I am too young to have a pension  

False – In reality, it is never too early to begin saving for retirement and though it seems to be a long way into the future, the earlier you save the more contingency you give your future self if the unexpected happens and you have to pause retirement saving further down the line. The earlier you start paying into a pension the more time you have for your retirement fund to grow.