Millions of working Britons are risking their financial future by making simple pension mistakes that could cost them thousands of pounds in retirement, according to a leading financial expert.
Vicky Parry, Editor of MoneyMagpie, has issued a stark warning about the common pitfalls in pension planning that could leave people struggling in their later years.
The Workplace Pension Trap
Since auto-enrolment was introduced, most workers now have access to a workplace pension - but many are tempted to opt out when they see deductions on their payslip. This could be a costly mistake.
"Your workplace pension includes free money," explains Parry. "Opting out means you miss out on employer contributions and Government tax relief on your pension savings."
While it might be difficult to see part of your salary deducted before you receive it, remember that your employer pays extra into your pension on top of your salary - money you completely miss out on if you opt out.
Why the State Pension Isn't Enough
Many Britons make the dangerous assumption that the State Pension will provide adequate income in retirement. The reality is quite different.
You need 35 years of full National Insurance contributions to qualify for the full State Pension, and at least ten years to receive anything at all. Even at the maximum amount, the State Pension currently provides just over £11,000 annually - insufficient for most people to live comfortably.
"There's no guarantee that pension protections like the Triple Lock will remain in place," warns Parry. "Nor can we be certain what the State Pension system will look like by the time you retire."
Taking Control of Your Pension
One of the most significant opportunities many people miss is consolidating multiple pension pots. With millions of pounds sitting in forgotten pensions, it's crucial to track down and manage all your retirement savings.
The Pensions Tracing Service can help locate missing pension pots. Once found, consider consolidating them into a single platform to avoid paying multiple fees and to keep better track of your funds.
However, Parry cautions: "Do not move a Defined Benefit pension. These pensions guarantee an income when you retire, and moving them can change the terms to your disadvantage."
She also recommends diversifying retirement savings by including ISAs in your planning. Unlike pensions, ISA funds can be accessed at any age tax-free, providing flexibility for early retirement or large purchases.
With pensions remaining confusing for many, MoneyMagpie has released an eBook titled 'Everything You Need to Know About Pensions (Without Being Bored to Tears)', available free on Kindle Unlimited or for £3.99 to purchase.
