Hi, I'm Michael Nel, and I've been working with pensions for over 25 years.
We've all heard myths before – things like unicorns and mermaids. But there are pension myths out there too, and I want to debunk some of them.
The first one that we're going to go through is, "It's too early to save for retirement".
Nope!
Pension plans are designed for the long term. You and your employer usually pay in. And you can get tax benefits too, essentially a helping hand from the government.
Money paid into a pension plan is invested, and the longer it's invested, the more potential it has to grow. Even starting with a small amount can make a big difference in the future. Just remember, as with all investments, there's an element of risk involved. The value can go down as well as up, and you could get back less than what you paid in. But starting early can give you a better chance to ride out those ups and downs.
The second myth we're going to go through is, "It's too late to save for retirement".
If you are in, say, your 50s or 60s, a pension plan can still help you get closer to your retirement goals.You and your employer can continue paying in, you can keep getting tax benefits, and you can still achieve investment growth – all things that could give you a financial boost, even if you're gearing up for retirement just now.
So it's not necessarily too late, but do be aware that when you're over age 75, you no longer get tax relief on payments into a pension, and not every plan will allow you to keep paying in.
The third myth that we're going to go through is, "The State Pension will definitely cover everything".
It's estimated that a single person with a minimum standard of living might spend just £14,000 a year in retirement.
But the full new State Pension is currently a little under £12,000. So the State Pension won't necessarily cover all your costs.
Fourth one is, "Your pension plans always die with the plan holder."
This depends on the plan and provider that you have.
But you can usually nominate the people you want your pension savings to go to when you die, also known as your beneficiaries. It's important to do this, as pension plans aren't usually covered by your Will.
And if you buy an annuity, you might be able to add on features that provide for your loved ones on your death.
The last myth we're going to cover is, "I don't need to pay attention to my pension plan."
When it comes to pension plans, you might have a lot of the work done for you. For example, you might be in a ready-made investment option, managed by experts. But that doesn't mean you should ignore your plans.
You need to regularly review your investments and the amount you are paying in so you can check you're still comfortable with them and decide if you're on track.
Plus, you need to keep your details, such as your address, beneficiaries and selected retirement date up to date, so your provider can help you keep your plan on track and contact you with important information.
