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Three pension and retirement myths busted

In honour of Pension Awareness Week, we uncover the most common misconceptions about retirement and how to access a pension. Plus, take a retirement quiz for a chance to win one of six luxury prizes. Full terms below.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

It’s quite easy to let the nitty gritty details about pensions pass you by. And with the many rule changes over the years, it’s no wonder why there are so many misconceptions. We want to help you bust those myths and get the answers to your questions. Here are some of the most common untruths. Please remember that you can’t usually access a pension until you’re at least 55 (rising to 57 from 2028).

Pension and tax rules can change, and any benefits will depend on your circumstances. This article isn’t personal advice. If you’re unsure, please seek advice.

"I have to buy an annuity when I get to retirement"

Before pension freedom rules were introduced, most people only had the option to turn their pension into a secure lifetime income (an annuity).

Fast forward four years, and keeping a pension invested is one of the most popular choices people make. Security is still important, but it’s the flexibility that’s so appealing. You can choose your own investments and are free to make withdrawals as and when you need to. Remember though, investments can fall as well as rise in value, so you could get back less than you invest.

Choosing to keep your pension invested is higher risk. The value of your pension and income aren’t guaranteed and if your investments don’t perform as you’d hoped you could run out of money. So you might not want to rule out annuities completely.

If you wanted the best of both worlds, you could mix the options to match your needs. You could consider using some of your pension to secure enough income to cover your household bills, and keep the rest invested. It’s your money and your choice.

If you want to find out more about your retirement options download our guide.

"I have to take my pension in one go"

Saying goodbye to the 9-5 grind and suddenly stopping work altogether has become a thing of the past. Nowadays, it’s a lot more flexible. More and more people are choosing to phase into retirement by reducing their hours first, before giving up work completely.

Thankfully, the flexibility of finishing work is matched by the rules of the pension system. You don’t have to take your pension in one go, and you can choose to take as much or as little income as you like.

Remember though, if you’re planning to access some of your pension but still pay into it through work, there are some things you’ll need to consider. As soon as you withdraw a taxable income you may be limited to paying £4,000 per tax year into a personal pension. If you just plan to take your tax-free cash, and no taxable income, you can still pay in up to £40,000 per tax year. The amount you can receive tax relief on is limited to the amount of your relevant UK earnings.

Find out more on contribution limits

Our factsheet also offers five essential semi-retirement tips.

"The State will pay for me in retirement"

Unfortunately, for most people the State Pension won’t be enough on its own. The average retired couple spends £25,937 per year and the State Pension only pays a combined £17,534.

You can find out more about the State Pension here.

Luckily, with the introduction of auto-enrolment few people should reach retirement with solely the State Pension to rely on for income. Under auto-enrolment, your employer is required to automatically sign you up to a workplace pension scheme if you are eligible. You can opt out, however it’s a good chance to boost your retirement savings. Your employer will pay at least 3% of your salary into the pension scheme. You’ll likely need to pay in too (with a helping hand from the government) in order to top it up to a minimum of 8% of your salary.

Remember though, not everyone qualifies. You won’t be automatically eligible if you earn less than £833 a month (£10,000 a year) or are under 22. But you do have the right to opt in. You should check the details with your employer.

Our pension calculator can help you to work out how much money you might get in retirement. Plus it could give you some tips about what to do if your pension savings aren’t quite where you’d like them to be.

Take a retirement quiz for a chance to win

As it's Pension Awareness Week, we’re celebrating all things pensions by giving away a luxury Fortnum & Mason hamper, and five cases of wine. To be in with a chance to win one of these prizes, all you need to do is answer every question, and then give your details at the end of the quiz. Terms below.

Take quiz now

What help and guidance is available?

What you do with your pension is an important decision. We strongly recommend you understand your options and check your chosen option is right for your circumstances. If you’re unsure take advice or seek guidance.

The government provides a free and impartial service to help you understand your retirement options – more on Pension Wise.

If you have any questions call our experts on 0117 980 9940. They’re available six days a week: Monday-Thursday 8am-7pm, Friday 8am-6pm and Saturday 9:30am-12:30pm.

Full terms of the offer

  1. Subject to these terms and conditions, if you complete our pension or retirement options quiz between 9 September 2019 and 15 September 2019 (the “Offer Period”) we will enter you into our prize draw (the “Draw”) to win either a Fortnum & Mason hamper or a mixed case of wine from Great Western Wine. The Draw is only open to individuals who complete the quiz in full. The Draw is free to enter.
  2. To be eligible to win a prize, you must also:
    • be 18 or older;
    • be resident in the United Kingdom;
    • not be an employee of any Hargreaves Lansdown group company or a member of any such employee’s immediate family or household;
    • comply with these terms and conditions.

  3. Upon completing a quiz during the Offer Period, you will be automatically entered into the Draw. You will only be entered into the Draw once. You will be entered into the Draw on the date you first complete a quiz during the Offer Period and you will not receive an entry into the Draw for each additional quiz you complete. Entries received after the Offer Period has closed will not be entered into the Draw.
  4. There is one Fortnum & Mason hamper worth £175 and five mixed cases of Great Western Wine worth up to £90 each to be won. Winners can decide to receive a cheque for the monetary amount should they win and would prefer an equivalent cash prize. Each entrant into the Draw shall only be entitled to win one of the six prizes. If you would like to opt out of the Draw, please notify us by calling 0117 980 9940.
  5. The winners will be chosen by random draw on 16 September 2019.
  6. The winners will be notified (using details provided at entry) either by telephone or, if we can’t reach the winners by telephone, by email, before 20 September 2019 and at this point, winners must provide a postal address to claim their prize. If we haven’t heard from a winner by 3pm on 20 September 2019, we will hold on to the prize until we do. If we still haven’t heard from the winner by 21 October 2019, that winner will not be entitled to a prize and a draw will take place to select another winner.
  7. Please note we are required to make available information that indicates that a valid award took place. To comply with this obligation, we will send the surname and county of prize winners to anyone requesting this information. If you object to any or all of your surname and county being published or made available, please notify us by calling 0117 980 9940. Please note, we must still provide your details to the Advertising Standards Authority on request.
  8. The prizes will be posted to the winners within five working days of being notified of their win.
  9. Our decision regarding any aspect of the Draw is final and binding and no correspondence will be entered into about it.
  10. Participants are deemed to have accepted and agreed to be bound by these terms and conditions upon entry. We reserve the right to refuse entry, or refuse to award the prize to anyone in breach of these terms and conditions.
  11. We reserve the right to replace the prize with an alternative prize of equal value if circumstances beyond our control make it necessary to do so.
  12. We reserve the right to hold, void, cancel, suspend, or amend the Draw where it becomes necessary to do so.
  13. We will process your name and address for the purpose of the Draw. Personal data supplied during the course of the Draw will be processed as set out in our privacy policy.
  14. The Draw will be governed by English law and entrants to the Draw submit to the jurisdiction of the English courts.
  15. This Draw is provided by Hargreaves Lansdown Asset Management Limited, which is a limited company registered in England & Wales with company number 01896481 whose registered office is One College Square South, Anchor Road, Bristol, BS1 5HL.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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