At the Pension Planner, we use our decades of combined experience to provide guidance and reassurance, as well as the financial education you need to make informed choices based on all the available information.

Sometimes this means dispelling prevalent retirement myths.

Here are just three and why they simply aren’t true.

1. “I need to hit pension-saving milestones at exact times or else my retirement plans are ruined”

A recent Independent report suggests that you should accumulate twice your annual salary in your pension by your mid-30s. Based on the average UK salary according to the Office for National Statistics (ONS), this equates to around £70,000.

The Pensions and Lifetime Savings Association (PSLA), meanwhile, confirms that a single person looking to live a “moderate” retirement will need an income of around £31,300 a year. Which? confirms that this would require a pension pot worth more than £400,000 at retirement.

That’s a lot of figures to take in, but the important thing to remember is that these are guides only. Rough estimates, however carefully calculated, can’t consider every retiree’s individual circumstances.

How much you need to save at any point is dependent on the type of retirement you want to live, when you want to retire, and how much you have saved elsewhere.

This renders generic pension-saving milestones irrelevant and highlights the importance of individual cash flow and long-term planning.

Speaking to an expert adviser can help you to think about the money you have now and the life you’d like to live in retirement, allowing you to reach your goals in the future without sacrificing too much in your present.

2. “I can withdraw 4% a year from my pension and never run out of money”

The so-called “4% rule” was first suggested by American financial planner William Bengen back in 1994. This in itself raises two red flags.

Not only is this “rule” based on the American market, but the American market 30 years ago. And the financial landscape was very different back then. According to Bank of England (BoE) figures, the average UK base rate during the 1990s was 7.61% but peaked above 13%. You could have afforded to withdraw a regular 4% income and left the rest to grow, but rates are much lower today.

It’s also important to remember that your expenditure in retirement is unlikely to be static. Instead, it might help to think of the “retirement smile”. This imagines your expenditure throughout retirement plotted as a graph.

You’ll likely spend more in the early “active” years of your retirement, while you are in good health and able to tick items off your retirement bucket list. As you get older, you might begin to slow down, and your spending might decrease. In later life, potential care costs will see an upturn in spending, completing the upward curve of the retirement smile.

In this context, committing to uniform 4% withdrawals makes little sense and a more flexible approach is clearly needed.

3. “I can manage my pension on my own and don’t need professional financial advice”

A recent report published by FTAdviser found that 58% of respondents accessed their pension without seeking any form of advice – whether from an adviser, their pension provider or a third-party support service like MoneyHelper.

Many of those surveyed have taken tax-free cash without being sure whether it was the right choice for them. In fact:

• 15% saw tax-free cash as an unexpected financial bonus
• 10% likened the payout to payday and felt an urge to spend the cash.
• 46% accessed the cash simply because they could.

The survey found that 1 in 7 later regretted their decision and now worried about running out of money in retirement.

Advice is invaluable at all stages of the retirement journey, from helping you to save enough to managing your pension budget.

Get in touch

If you need help with any aspect of your retirement planning we’re on hand to help, so get in touch. Email info@thepensionplanner.co.uk or call 0800 0787 182.

Please note:

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.