What are the top 10 pension mistakes?

Pensions / Retirement
Approaching Retirement
Joe Phelan's picture
Are you hampering your savings by making any of these pension mistakes?
Numbers from 1 - 10

Improvements in public health, nutrition and medicine mean people are living longer than ever. In fact, some estimates suggest that as many as 1 in 6 (around 10m) of those alive in Britain today can expect to reach 100 years of age.

Those with ambitions of retiring so they have plenty of time to enjoy the fruits of their labour are now finding they must not only save more, but are required to stash their money away far more effectively.

Most people will rely on a pension to provide funds during their retirement, but hundreds of thousands of adults are currently failing to make the most of their savings. So, according to Hargreaves Lansdown, what are the ten most common pension mistakes, and how can these errors be remedied?


1. Not saving enough
Worryingly, it is estimated that 9 in 10 UK adults are falling short of their retirement targets, while a staggering 82 per cent of adults are ‘unaware’ how much money they should save to live comfortably once they stop working. Speaking to an IFA can ensure you attain a more rounded idea of how much money you need to be setting aside each month to achieve your retirement goal.

2. Delaying saving
Studies claim that half of UK adults doubt they will save enough to retire comfortably, while almost one in three over-55s admits they are expecting to be in debt once they finish working. Quite simply, the sooner you begin saving, the healthier your retirement pot will look once you eventually need to access it. An IFA can not only ensure you are saving enough, but will also be able to advise when it comes to investing.

3. Not checking your pension pot
Research suggests that half of over-50s don’t know the value of their pension, which is a seriously concerning statistic. If you do not know how much money you have, it is almost impossible to boost your savings appropriately. Given the importance of ensuring you have a sound pension pot, it is vital you remain aware of how much money you have saved away.

4. Failing to keep on top of investments
For many, investing is key to a strong pension. However, by declining to look at all available options and by failing to regularly assess the state of your investments, you could be missing out on significant sums of money. An IFA is an expert when it comes to investing, and by seeking the advice of a financial professional you could end up making much more from your investments.

5. Relying on property
Your house is likely to be the most significant investment you make in your life. However, deciding to use your property as your retirement fund is very risky; there is no guarantee your home will provide enough money to see you comfortably through your old age, nor is it certain you will be able to afford to buy another property. Speak to an IFA to assess and better understand your savings options.

6. Relying on inheritance
1 in 10 UK adults are relying on inheritance to fund retirement, according to a recent study. However, many of those anticipate receiving far more money than they will actually end up with. Also, it is very difficult to judge exactly when these funds will come to you. Though many will undoubtedly benefit from receiving inheritance money, it is essential that this does not form the core of your retirement planning.

7. Not taking up employer contributions
Companies, especially the larger ones, will likely offer a variety of pension benefits to their members of staff. By not taking advantage of these, you could be essentially throwing away free money. Speak to an IFA to better understand how to manage your workplace pension, and ensure you are fully aware of the benefits and bonuses you are entitled to.

8. Assuming the state will provide for you
Some studies suggest that one in seven UK adults have no private savings and will rely solely upon a state pension – worth approximately £8,600 a year - to support them once they retire. This is very worrying when you consider that people aged between 30 and 65 believe they will require £23,469 per year to be comfortable once they stop working. An IFA can not only help you set up a pension, but can ensure you make the most of the money you manage to squirrel away.

9. Not using pensions to save on tax
Saving in a pension scheme can provide you with significant tax advantages when compared to saving into a bank account. Speaking to an IFA can ensure you pay as little tax as possible, and will help you make the most of your hard-earned cash.

10. Overspending once retired
It can be very easy to become complacent with your money once you eventually do retire. Your savings, however substantial, are finite, so it is important to regularly monitor spending and refrain from making too many extravagant purchases. Working with an IFA can ensure you make the most of your money post-employment.
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