Blog » 5 common pension myths debunked

5 common pension myths debunked

November 2, 2021
The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article.

Diving into the world of pensions can be pretty awe-inspiring at any age. Fundamentally, it all seems to make sense – you put money in, the money gets invested, you receive a nice little package when you say goodbye to the boss.

However, not all pensions or investments are the same and when you factor in benchmarks, future profits, the myriad of options and benefits to choose from and the unfathomable behaviour of the financial markets, it can all get too confusing. Where facts are sparse and understanding is basic, we often tend to refrain from finding out more – this is how bewildering myths arise.

In this article we are going to look at some of the most prevalent and destructive myths that have built up over the years, and then reveal the truth.

“Taking your pension before you retire is a definite no-no.”

On first glance this makes absolute sense. After all, the pension fund you have built up was intended to make you secure and offer you lots of options when you retired from work. Taking money from this pot early will leave you worse off in retirement. That point aside – are you allowed to withdraw money early anyway?

Up until 2015 your options were pretty limited when it came to withdrawing pension money early. Then, in 2015, the law changed. The government introduced the Pension Freedoms, which allow individuals with an eligible scheme to take money from their pension how and when they choose from the age of 55.

But there could be a lot of obstacles along the way. Because of issues with tax, the fact that all pensions should be analysed carefully, and because we all have unique financial needs in our later years, it is important that you seek out the help of a regulated financial adviser.

A financial specialist, such as Pension Access, can help you factor in the pension freedoms as an extra option when it comes to your financial planning and retirement strategy. It can help you pay off burdensome debts and maybe give yourself a treat while still keeping your retirement years safe and secure.

Taking pension money early is not right for everyone, though. That’s why it is so important to get advice from a regulated specialist before making any final and lasting decisions.

Man sitting at laptop looking confused | pension myths

“Pensions are like a bank account; I don’t need help managing them.”

The idea behind pensions is very simple. Save money in an environment where it has every opportunity to grow so that your pot is as big as possible when you retire. Then, you withdraw the money as and when you need it. And yet there are so many moving parts to a pension, let alone taking into account your changing plans as you journey through life. This is why specialist financial help can be invaluable.

Most UK pensions are invested in stock markets because this is where you are most likely to get the best returns. And yet, stock markets are notoriously fickle and complicated. They go up and down in value all the time. So, without a clear investment strategy, and in-depth trading knowledge, there is a danger of making irreversible decisions that could seriously harm the long-term prospects of your pension.

Then there is the question of managing your investments in line with your attitude to investment risk as you approach and enter retirement. All these elements to factor-in make pensions a lot trickier to manage than a bank account.

“Everyone receives the same State Pension.”

More or less. But it is the less which can creep up and shock people at the wrong time. The fact is the amount of State Pension you receive is dependant upon the amount of National Insurance contributions you make while you are working. A set amount is taken from your income at source before you receive your salary.

However, if you are out of work for any amount of time, or for some reason your contributions are not paid (if you are self-employed you will need to manually make sure contributions are paid), you may not receive the maximum amount of State Pension.

It is therefore useful to keep an eye on the level of pension you will receive when you retire. You can see a prediction here. You can also top it up by adding extra contributions here.

It is likely that your State Pension will be smaller than your private or occupational pension – but that does not make it less important. Many find it is essential for providing the fundamental retirement needs. So, keep a track of it.

lady sitting on the sofa with laptop and a cup of tea researching pensions

“When I die my pension has no value.”

After saving your hard-earned cash throughout your life, it would seem a pity if that money were lost should you not reach, or fully experience retirement. Again, since the introduction of the Pension Freedoms in 2015, it is simpler to make sure that your pension pot is passed on to your loved ones should you die before it has been used.

This way you can be safe in the thought that as well as giving yourself an income in your later years you could also be providing for your family or closest friends.

You need to make your pension provider aware of who you want the money to go to should the worst come to the worst. Also, this money is not treated as inheritance in the usual way and so will not attract the heavy burden of taxation.

“I can forget my old workplace pension and just let it grow.”

As long as you meet certain criteria, employers are legally obliged to offer you a workplace pension. This is helping more and more people to save for retirement, especially as the employer must contribute to the pension, too. It does mean, though, that every time you start a new job you will have another workplace pension to manage. And this means it’s easy to forget about your old workplace pensions.

The money you have saved into old workplaces schemes is still yours. But if you lose track of it, your money could become part of the £26.6 billion pension blackhole that exists in the UK1. And there’s a good chance there is a better home out there for the money you have saved in your old workplace schemes. So, every time you start a new job it makes sense to have a chat with a regulated financial adviser, to see if you could be better off transferring these savings to a new pension.

As much as preparing for your future is essential, not everyone finds the world of pensions a walk in the park. There are many websites such as the Pensions Advisory Service or Which Pensions which offer excellent guidance. Also, one of our regulated pension advisers can walk you through your options and guide you on a good route forward – just give us a call.

Article updated: 13/12/2023

1The Association of British Insurers: as of 2022

Related posts

Thinking about your pension options?

We are authorised and regulated by the Financial Conduct authority. This means we can help you to make the best possible decisions when it comes to your pension.

0800 009 3388
Mon-Fri 9am-5pm


Pension Access is a trading name of Harbour Rock Capital Limited which is registered in England & Wales as a Limited Company, No. 10290349. Authorised and regulated by the Financial Conduct Authority, No. 754580. Registered Offices: Affinity House, Beaufort Court, Sir Thomas Longley Road, Rochester, Kent, ME2 4FD. Telephone: 0800 009 3388. Email:
© 2024 Pension Access. All right reserved.
What's in your info pack?
Your FREE information pack contains all the information you need to make an informed decision on wheter or not taking tax free cash from your pension is right for you.
Get your Free Info Pack
Complete the form and we'll send you an information pack in the post
Note: We are unable to advise on the state pension or any pension you are already taking an income from.

    Get your free info pack

    Where should we send your info pack?

    Please complete your details below and we'll send your information pack in the next available post

    Find Your address

    Type in your postcode or start typing your address then select from the drop-down list

    Your address

    We'll post your information pack here

    Keeping in touch

    We'll send you updates by email or text message. One of our specialists may call, just in case you have any questions about your pension. We’re big believers in never bombarding people with calls.

    Safety PadlockYour information is safe with us. Our calls are recorded for regulatory, legal and training requirements. Please see our privacy notice for information on our data practices here


    Hands using calculator to calculate home equity amount