10 Pension Mistakes You Need To Avoid

Pensions can be a tricky business. One mistake could have drastic consequences for your retirement fund. Whether you’ve just started saving or are well along in the process, here are ten common pension mistakes to avoid. Keep reading to discover how to help your pension with Hilltop’s pension management strategies.

10 Pension Mistakes To Avoid

Here are ten of the most common UK pension mistakes to avoid and tips on how to manage a pension:

1. Not checking your pension regularly

A common pension mistake is not checking your pension regularly. If you’re investing money into a pension, keeping track of how it’s performing is important to ensure you’re on course to meet your retirement goals. You should regularly check your pension statements to ensure your investment performs as expected, plus to check if your contributions are correct. If you notice any discrepancies, it’s important to address them quickly to avoid potential financial loss.

People regularly check their cash savings, stocks and shares investments and ISAs, but seem to neglect their pension which is probably the largest savings product they own.

2. Losing track of your pension pots

It’s not uncommon for people to have multiple pension pots throughout their lifetime. It’s important to keep track of these as they could affect your pension in later life. You can track down any misplaced pension pots using the government’s pension tracing service and update your details accordingly. This will ensure you’re fully up to speed with your pension contributions and how they may affect your retirement plans.

3. Delaying saving

Delaying saving into your pension can be a costly mistake. It’s important to start saving as soon as possible to benefit from compound interest and ensure you have enough money for retirement. The earlier you start saving, the more time you will have for your money to grow. If you wait too long to start investing, your pension pot could be much smaller than you expected by the time you reach retirement age. That said, it’s always beneficial to save in a tax efficient pension, even in later life.

4. Not saving enough

Not saving enough for your pension is another common pension error and with auto-enrolment pensions this could become a bigger problem in the future. If you’re not putting away enough money each month, your retirement could be less comfortable than you’d hoped, and just relying on the money your employer is saving for you could be a mistake. Saving enough each month will ensure your retirement plans are on track. If you’re unsure how much you should be saving, it’s worth speaking to a financial adviser who can help you calculate how much you will need for your retirement.

5. Not taking employer contributions

Not taking advantage of employer contributions is one of the most common pension mistakes people make. Employers often offer matching contributions or, at the very least, contribute 3% of your earnings. Therefore, your employer’s contributions can be an excellent way to boost your retirement savings, helping your pension to grow more quickly. So ensure you take full advantage of what’s available to maximise your pension savings.

6. Relying on the state pension

Relying solely on the state pension is another pension mistake many people make. The state pension alone is unlikely to be enough to fund your retirement. Assuming you’ve accumulated at least 35 years of National Insurance contributions by the time you reach state pension age, the most you would receive currently is £185.15 a week or £9,600 per annum. That’s much less than most people are used to living on.

7. Not shopping around

Not shopping around for a pension is another common pension error. It’s important to compare different pension providers to ensure you’re getting the best deal. Fees such as annual management charges, platform fees and exit fees can impact your pension pot and reduce the amount of money you’ll have available when it comes to retirement. So it’s important to consider all the benefits and fees each provider offers.

8. Not reviewing your situation

Not reviewing your pension situation is another pension mistake to avoid. Your pension should be reviewed annually to ensure it’s still suitable for your needs and goals. You may need to adjust contributions depending on your life situation and any changes to the tax landscape or pension laws. A pension review by a financial adviser can help you understand what these changes mean for your pension and help you make any necessary tweaks.

9. Not diversifying your portfolio

Another common pension error is not diversifying your pension portfolio. Diversifying investments is important to reduce risk and ensure your pension savings are adequately protected. Relying too much on property can be particularly dangerous, exposing you to market fluctuations. Diversification is key to ensuring you have a secure pension pot, so it’s important to spread your investments across different types of assets.

10. Relying too much on inheritance

Relying on inheritance is a pension mistake many people make. Inheritance can be an unpredictable source of income. It depends on the size of the inheritance and whether or not it’s needed to cover any debts or expenses. Remember that there’s no guarantee you’ll receive an inheritance, so it’s important to plan ahead and ensure you’re saving enough for your retirement to secure a guaranteed level of income in retirement.

Pension Advice from Hilltop

Reviewing your pension regularly is important to ensure it’s still suitable for your needs. Shopping around for pensions, considering fees, and diversifying investments are all key steps for maximising your pension pot. At Hilltop Financial Planning, we offer a wealth of pension management services. Our advisers can help you avoid pension mistakes and show you how to manage your pension to ensure you’re well on track for retirement.

If you’d like pension advice or to arrange a consultation, please contact us on 0161 413 7051. We’re open 9am to 5pm Monday to Thursday and 9am to 4pm on Fridays. Hilltop Financial Planning is authorised and regulated by the Financial Conduct Authority. We are ranked in the Top 100 UK financial advisors by FT Advisor.