Busting pension myths and misconceptions

Young boy putting coins into a red piggy bank Compulsory pensions

Pensions

MoneyPlus Features Team

12th January 2015 at 3:01pm

With changes to pensions coming on April 6 2015, we asked real people what they thought about the changes, and what they knew about them too.

With our research showing that four out of five people aren’t aware of how the pensions changes in April will affect them, we want to dispel a few of the myths surrounding pensions and savings.

Have a read below to bust some of the common pension myths and misconceptions surrounding the changes coming on April 6 2015.

Pension Myths

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Myths and misconceptions

Four out of five people are unaware of how pension reforms will affect them

You’ll be able to choose how you take income from your pension savings from 6 April 2015

You can opt for either a guaranteed income for life (an annuity) or a flexible income, where you can start, stop and change what you take out (drawdown).

Contrary to speculation, the 14% of people who say they will be dipping in to their pension pots before they retire do not plan to splash out on extravagant purchases.

The top five reasons for doing so are:

  1. 26% will plan to put it towards a holiday
  2. 25% plan to live on it
  3. 23% will pay off debts
  4. 20% will invest in DIY and home renovations
  5. 16% will pay off their mortgage

The pensions death tax of 55% is being scrapped

For some people, their pension savings will be passed onto their loved ones tax free (if they die before age 75).

You’ll also be able to start with flexible income and later opt for fixed income, if you prefer.

Usually, your Will doesn’t control who inherits your pension

A beneficiary nomination helps to show your preference, so make sure your one is up to date. Your pension company can give you information on how to update this, or speak to your financial adviser if you have one.

Last Will & Testament

Your will doesn’t control who inherits your pension.

You don’t have to stop work and retire before you start to access your pension savings in future

It will be possible to take some money out of a pension from the age of 55, but keep working and paying into a pension, which is good news and could help anyone wanting to pay off a debt early then keep saving, or to gradually cut back their working hours ahead of retirement.

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