If you are approaching retirement age, it\u2019s important to know your pension is going to finance your plans.
\n<\/p>\n
Pension legislation is extremely complex and it\u2019s not realistic to expect everyone to understand it completely. But, since we all hope to retire one day, it is important to get to grips with some of the basics.<\/p>\n
It\u2019s particularly helpful to become aware of the things you may have thought were facts that are actually myths. Here are some examples.<\/p>\n
Myth: The government pays your pension<\/strong> Myth: Your employer pays your pension<\/strong> Myth: You can\u2019t save more than your lifetime allowance<\/strong> Myth: Your pension provider\u2019s default fund is suitable for everyone<\/strong> Myth: Annuities are outdated<\/strong> Myth: You can\u2019t pass on a pension<\/strong> A PENSION IS A LONG-TERM INVESTMENT NOT NORMALLY ACCESSIBLE UNTIL AGE 55 (57 FROM APRIL 2028). THE VALUE OF YOUR INVESTMENTS (AND ANY INCOME FROM THEM) CAN GO DOWN AS WELL AS UP WHICH WOULD HAVE AN IMPACT ON THE LEVEL OF PENSION BENEFITS AVAILABLE. YOUR PENSION INCOME COULD ALSO BE AFFECTED BY THE INTEREST RATES AT THE TIME YOU TAKE YOUR BENEFITS.<\/p>\n THE TAX IMPLICATIONS OF PENSION WITHDRAWALS WILL BE BASED ON YOUR INDIVIDUAL CIRCUMSTANCES, TAX LEGISLATION AND REGULATION WHICH ARE SUBJECT TO CHANGE IN THE FUTURE. YOU SHOULD SEEK ADVICE TO UNDERSTAND YOUR OPTIONS AT RETIREMENT.\t\t<\/p>\n","protected":false},"excerpt":{"rendered":" Answers to the myths about your pension questions If you are approaching retirement age, it\u2019s important to know your pension is going to finance your plans.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[2],"tags":[],"class_list":["post-3420","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/posts\/3420","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/comments?post=3420"}],"version-history":[{"count":0,"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/posts\/3420\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/media?parent=3420"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/categories?post=3420"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.rmw-ifa.co.uk\/financialnews\/wp-json\/wp\/v2\/tags?post=3420"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\nFact: The government pays most UK adults over the pension age a State Pension, which is currently:
\nRetired post-April 2016 \u2013 max State Pension of \u00a3179.60 a week
\nRetired pre-April 2016 \u2013 max basic State Pension of \u00a3137.60 a week (a top-up is available for some, called the Additional State Pension)
\nNot everyone is eligible for the full amount, which requires you to have at least 35 qualifying years on your National Insurance record. If you have less than ten qualifying years on your record, you\u2019ll receive nothing.
\nEven if you receive the full amount, you\u2019ll usually need to supplement it with your own pension savings.<\/p>\n
\nFact: Most people are automatically enrolled into a workplace pension. Your employer is usually required to pay a minimum of 3% of your salary into it and you must also pay a minimum of 5% of your salary.
\nIf you keep your contributions at the minimum level, it might be difficult to save enough for retirement. As life expectancies grow longer, your retirement can be almost as long as your working life. It\u2019s therefore important to put aside a portion of your earnings to create a pension pot that will enable you to receive the income and live the lifestyle you want during retirement.<\/p>\n
\nFact: There is a lifetime allowance on the benefits you can access from your pension, which is currently \u00a31,073,100 (tax year 2021\/22). That doesn\u2019t mean that you can\u2019t withdraw any more after that, but it does mean that you\u2019ll pay a tax charge of up to 55%. However, there are ways of withdrawing the money with a tax charge of 25%.<\/p>\n
\nFact: Most pension default funds will start out with a high-risk strategy and steadily move your capital into lower-risk investments, such as bonds and cash, as you get closer to retirement. This is to reduce volatility in the value of your investments so that you can have a higher degree of confidence in how much you\u2019ll eventually end up with.
\nIf you don\u2019t plan to purchase an annuity, you don\u2019t necessarily need to reduce volatility before retirement. You may be leaving some of your money invested for several more decades, in which case a higher risk strategy may be more appropriate.<\/p>\n
\nFact: There was a time when almost everyone bought an annuity when they retired, and that time has passed because there are now alternative ways to access your pension savings.
\nBut annuities still have a useful role for generating a retirement income and can be an appropriate product for some people. Unlike other pension withdrawal methods, such as drawdown, an annuity offers a fixed income for life, so there\u2019s no risk of your money running out. That\u2019s a crucial benefit for many pensioners.<\/p>\n
\nFact: If you\u2019ve used your pension savings to purchase an annuity, the income from this will usually cease when you die. But if you have pension savings that you haven\u2019t used to buy an annuity (for example, if you\u2019ve been taking an income through drawdown), what\u2019s left can be passed on to a loved one.
\nIf you die before the age of 75 there will usually be no tax to pay by the beneficiary. Otherwise, they will need to pay Income Tax according to their tax band.<\/p>\n