Researching pensions or even just understanding your own pension scheme can be pretty daunting. There is so much information and misinformation out there! So we are here to help by busting a few of those pension myths. Check out Wealthify for a more comprehensive look at your options and what is right for you.
It is too early
It is never too early to start saving into a pension plan and actually the earlier the better. The sooner you start paying into your pension the more time has the potential to grow and a bigger pension pot can then earn even more on top. This snowball effect makes a huge difference in the long term.
It is too late
Whilst we agree that earlier is better in terms of investment growth, but it is still worthwhile getting a last-minute pension payment push later in your life. Money that you put into a personal or workplace pension scheme gets tax benefits from the government – for example, if you pay UK basic rate income tax then it only costs you £80 to put £100 into your pension pot. If you are a higher rate or additional rate taxpayer, then it may cost even less than that! So, it is definitely worthwhile
Laws and tax rules may change in the future and your own personal circumstances, including where you live in the UK, will have an impact on tax.
The State Pension will pay for my retirement
If your plan is to rely on the state pension when you retire then you may be in for a shock when you find yourself trying to live off £185.15 a week (provided that you have paid the necessary 35 years of national insurance payments). The state pension is well under the amount that you would receive working full-time on minimum wage and with the rising cost of living this is not going to cut it.
I have a workplace pension so I am covered
Auto-enrollment came into effect in 2012, forcing employers to enrol their eligible employees in a pension scheme automatically. This meant that by April 2020 there were 10 million people in workplace pension schemes. If you are one of these people with a workplace pension then at least 8% of your earnings will go into it (some of which will be paid by your employer). But is this going to be enough for you? The Pensions Policy Institute suggests that 8% is not enough to provide similar working-life living standards in retirement – it is also less than half the rate that was paid into typical pension schemes in the past that paid out a percentage of your final salary.
I have property so I do not need a pension
Many people have opted to invest in property in recent years and rely on this as the main source of income in their retirement. But this might not be the best idea.
Renting out property for regular income is a heck of a lot of work, especially for someone at retirement age. There are also a lot of restrictions on this as all your money is tied up in the property meaning you would have to sell if you wanted extra cash.