Pension Myths that people still believe
I can take my pension before I am 55?
The normal minimum pension age increased from 50 to 55 from 6 April 2010. Since then, people are normally only allowed to start receiving their pension payments from a registered pension scheme when they are aged 55 or older. The exceptions are where they have health problems or they are allowed to start their pensions from a lower protected pension age under the pension tax rules
I’m too young to start a pension?
You’re never too young. Like most things in life, you get what you pay for. If you want a good income when you retire, the sooner you start saving, the better, as you can spread the cost over a longer period and your money will have time to grow.
Pensions aren’t a good way to save for retirement!
Pensions are a great way to save for when you’re no longer working – that’s what they’re designed for. You get tax relief on your contributions and, in many cases, if you save through a Company Pension Scheme, you benefit from valuable contributions from your employer.
We’re not saying a pension is the only way to save – there are other ways but they aren’t all tax efficient. You’ll probably find that a combination of savings and investments is the best option – after all, variety is the spice of life.
I can’t afford it!
There are always demands on our money, but a pension probably won’t cost as much as you think. Say you earn £24,000 a year and contribute 5% towards your pension. £100 would be invested in your pension each month – but you’d only pay £80 of this if you’re a basic rate taxpayer (and less if you are a higher rate taxpayer). You’d be hard pushed to find a more cost-effective way to save for retirement.
I’ll be fine – the State will look after me!
Will it? The basic State pension is around £102 a week. How far will that go? And even if you can manage to pay for the essentials like food and bills, will you have enough left to enjoy your retirement to the full? People are living longer than ever before; this could mean another 20 years or more after you stop working. Make sure you can live the life you want
My house will pay for my retirement!
It could do – but you still need somewhere to live. It’s true that property has done well over the last couple of decades, but things aren’t looking quite so rosy now. How can you be sure that your house will be worth enough when you retire? And remember, with a pension you receive tax relief on your contributions, not to mention any contributions you may get from your employer. There’s no one else paying into your mortgage.