It’s quite easy to let the details of pensions pass you by. The system can be quite complicated and rules change regularly, but it is important to try to keep on top of what’s happening. After all, there’s a lot to think about when choosing the right pension.
There are a lot of misconceptions surrounding pensions and this article from The Telegraph discusses the myths surrounding your retirement planning. Here, we will take a look at some of the things you might have misunderstood...
Property Is My Pension
Investing in property is highly recommended by many, but this investment in place of a pension may not be the best idea. Property is not exempt from tax. All contributions and gains from pensions come tax-free, whereas property is subject to charges such as inheritance and capital gains tax.
A Pension Only Lasts as Long as I Do
At one point, if pension savings were used to buy a single annuity, upon the individual’s death all pension income stopped (unless the pension was a joint annuity which then passed to their spouse). Now however, if a person under the age of 75 dies, the new pension recipients are not taxed. If over 75, recipients will only pay their own “marginal” income tax rate on anything they take as inheritance. The pension can then be taken by the deceased’s child as a regular pension, acting as a second income.
I Pass on My Pension in My Will
Pensions are passed on via a “beneficiary nomination form”. Pension scheme trustees will refer to a will in the event that one of these forms has not been filled in, however to avoid any doubt, it is advised that this form is completed.
I Can Access My Pension When I Am 55
When you can access your private pension is very flexible and typically available from age 55 onwards. In respect of company pensions however this might be set by the company you work/worked for and might even be linked to your State Pension Age. Until recently the standard State Pension Age was 65, however this has now changed. Depending on the year you were born, State Pension Age can differ greatly. To see when you will receive your state pension, you can use this pension calculator on the government website.