The world of pensions can seem a complicated, jargon-rich area, with plenty of myths. We’re here to offer some myth-busting advice for employers and employees alike.
Common myths about workplace pension
- It’s not worth having a workplace pension
Not true! Most people receive more back than they contributed. They also receive contributions from their employers, and the government (in terms of tax relief).
- There’s no point starting too early
False! The earlier you start, the more comfortable your retirement will be, and you may even be able to retire earlier (we’re not talking a few years either – those who have a good pension pot often retire many, many years earlier than the national average).
- Once you’re past a certain age, it’s too late
Also not true! A small pension is better than no pension. Of course, it’s better to start early but we still advise you to start a pension, whatever your age – and contribute as much as you can afford.
- It’s better to invest in property
This is a very risky strategy. The housing market fluctuates, so it very much depends on the value of any property when you’re ready to retire. Plus: You’re missing out on the contributions we mentioned in above.
- The state pension is enough
Calculate how much income you think you’ll need – not just for your expenses, but so that you can enjoy a comfortable lifestyle, doing the things you enjoy. Also, if your retirement age is still many years away, you can’t predict how the state pension scheme may change (or whether it might end).
- Minimum contributions is all I need
Unfortunately, again this isn’t true. Sadly, the government minimum contributions requirements for automatic enrolment pensions will not be enough for most people. Modelling from The Pensions Policy Institute suggests that savers should be putting aside between 11% and 14% to have a comfortable retirement.
- Automatic enrolment doesn’t apply to me
If you are an employer with staffing working for you in the UK and who are eligible for automatic enrolment, then this is not true. Regardless of the size of your business, what your profits are, or what industry you operate in, you must comply with automatic enrolment legislation. If you need further advice on this, get in touch and we’ll be happy to advise you.
- All employees MUST have a pension
Again, not true. Although we strongly advise everyone to have a retirement plan and pension in place, employees can choose to opt-out. The criteria for automatic enrolment are:
- Aged between 22 and state pension age
- Working in the UK
- Earning above the minimum threshold
However, anyone can opt-out if they wish.
If in doubt, it’s always worth checking with an expert. We have lots of advice and tips so browse our site to learn more about pensions and what they mean for you – and get in touch if you have questions.