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5 pension pitfalls and how you avoid them

5 pension pitfalls and how you avoid them

Are you someone who’d rather do anything else (even the washing up!) than think about your pension and what you’re going to have to live on during your retirement?  

Well, you’re not alone!  And help is at hand in the form of Pension Wise, which is a free and impartial government service.  Here are five pension pitfalls Pension Wise can help you avoid:

Paying too much tax on your pension savings

When it comes to the point you retire, you’re going to want to take an income from your pension pot. But HOW and WHEN you take your income can impact the amount of tax you pay. 

Pension Wise can explain how your pension will be taxed and what tricky things to watch out for.  For example, when you take money from your pension pot, 25% is tax free. You pay Income Tax on the other 75%.

Taking the wrong option

The idea of cashing in your entire pension pot and taking it as one cash lump sum may seem like a great idea, but it’s only one of your options.  And it may not be the right choice for you and your family!

At a Pension Wise appointment, we’ll help you understand all six options available when it comes to taking money from your pension pot.

Getting less for your pension than you could

You don’t have to choose a pension option such as an annuity from your current pension provider. You can switch your provider before taking your money.  

Eight out of ten people who stay with their existing provider lose out by not switching. So always shop around - moving to another provider could give you a bigger choice and potentially a higher income.

Check out this annuity comparison tool that sits on the Money Advice Service site, that will give you an idea of what income you could get from your pension pot with different providers. 

Getting scammed

Unfortunately, there are con artists and scammers out there, trying to get you to part with your life savings by handing over your pension pot. 

A scammer will often start by contacting you out of the blue about an investment or other business opportunity that you’ve not spoken to them about before. 

Common suggestions include:

•    ways that you can invest your pension money, usually promising unrealistic high returns
•    accessing your pension money before you’re 55, called pension release or pension unlocking.
•    offering you a free pension review. 

The Money Advice Service guide Pension release or pension unlocking can help you understand why it’s rarely a good idea to take money from your pension pot  before the age of 55. To find out more about some of the ways pension scammers will try to trick you, How to spot a pension scam is also worth having a look at.

If you’re not 100% sure, speak to a trained adviser at The Pensions Advisory Service (it’s free!) 0800 011 3797 before you agree to do anything. 

If you think you’ve already been the victim of a pension scam, call Action Fraud on 0300 123 2040 or use their online reporting tool.

Not taking into account how long you might live

We’re all living longer and it’s highly likely most of us will have to pay towards social care at some point in our lives. 

Pension Wise can give you guidance you on how to plan for these future costs because even though we might not like thinking about getting older, it is wise to prepare for it. 

To book a free telephone or face-to-face appointment, call 0800 138 3944 or go to

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