3 retirement myths busted | Hargreaves Lansdown

It’s pretty easy to miss the fine details about retreats. And with so many rule changes over the years, it’s no wonder there are so many misconceptions.

To help set the record straight, we’re busting some common myths about managing a pension.

This article is not personal advice. If you’re not sure what’s right for you, seek financial advice. Remember that pension and tax rules can change and benefits depend on your situation.

1. “My pension dies with me”

Fortunately, this is usually not the case. Depending on the type of pension you receive and what you have done with it, you may be able to pass it on to your loved ones.

For defined contribution pensions, such as the HL Self-Invested Personal Pension (SIPP), you can usually transfer any money left in your pension to a named beneficiary, free of inheritance tax.

In fact, if you die before age 75, any withdrawals they make will generally be completely tax-free. If you die after age 75, all withdrawals will be taxed at their marginal income tax rate.

How do I transfer my pension?

Retirement savings are generally not covered by a will, as they are not normally part of a person’s estate. This means that it is normally up to you to tell your pension fund who you want to inherit these savings from when you die.

This appointment is not legally binding, but must be reviewed by the trustees of the pension plan. You can choose to nominate as many people as you want, or even charities, and decide how much share you want each of them to receive. You can update your designated beneficiaries at any time, if your circumstances or wishes change.

If you have an HL Self-Invested Personal Pension (SIPP), you can update your designated beneficiaries through the “Account Settings” in your online account. You can also download a postal expression of wish (nomination) form if you prefer and return it by post.

Transmit an annuity

If you used your pension to purchase a life annuity, or plan to do so, the income you receive will cease upon your death, unless you have chosen specific options.

Type of annuity Benefit loved ones
Joint and survivor annuity You choose the amount of your annuity income that will continue to be paid to your beneficiary if you predecease him.
Warranty periods Your income is paid for your lifetime and it is also guaranteed to pay for a minimum term. If you die within this period, the income will continue to be paid to your estate or your dependents for the remainder of the guaranteed period.
Value protection Your beneficiaries will receive the original amount you used to purchase the annuity, minus any income already paid out, as a lump sum.


2. “I don’t need to watch my pension until I retire”

If you don’t commit to your retirement savings and investments, you might find that you can’t afford to retire when you want to.

Most pensions you get through work offer a default fund, which is a chosen type of investment for people who don’t want to make an active investment choice. Pension contributions are also often set at a minimum, unless you specify otherwise.

It might be fine for you initially, but as your circumstances and priorities change, your financial capacity and attitude to risk may also change.

You should also remember that all investments, including default funds, can go down as well as up, so you might get back less than you invest. You also cannot normally access your pension until at least age 55 (until age 57 by 2028).

Default investments are not personal to you

Default funds will aim to grow your money through a range of investments in the early years, usually weighted towards the stock market. However, this does not necessarily align with your goals and attitude to risk.

For example, in your youth, you might decide that you can afford more risk than your default investment allows. You may choose to invest at least part of your pension in higher risk investments. Generally, a higher risk investment can mean higher potential returns, and you would have more time to offset potential losses or ride out periods of market volatility.

In your later years, this could be a higher risk strategy because you would have less time to make up shortfalls or recover from investment loss.

Even if you’re happy with the default investment option and its performance, you should still review it regularly to make sure it continues to meet your goals and attitude to risk.

You can ask your pension fund for a fund fact sheet, where you can see how it is doing. Don’t look at funds or numbers in isolation or just focus on their value whether they’ve gone up or down – even the best fund managers sometimes lose money and past performance is not indicative of the future. coming.

It is more useful to compare your funds to their benchmark and to other funds in the industry. Ask yourself if the fund is outperforming its peers, keeping pace or lagging, and what are the prospects for the future and are they right for me?

If you are unsure whether an investment is right for you, seek financial advice.

3. “I’m stuck with the retirement fund I was given”

The average person has 11 jobs in their lifetime. This could mean 11 different pensions, each with different rules, features and benefits. Investment choice and fees between pension providers can vary widely, as can the quality of customer service.

It’s important to know how many pensions you have, how they work (including your retirement options) and what level of service you get for the charges you pay. Some providers offer more support and useful tools than others to help you manage your pension.

If you are unhappy with your current provider, you might consider switching to a new pension plan such as the HL SIPP (Self Invested Personal Pension). Before considering a transfer, it is useful to check for any loss of benefits or guarantees.

With the HL app, it’s also easier than ever to check the performance of your investments. Connect securely and make changes on the go.


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