Pension Myths and Misunderstandings

Moonwolf

After the post in the link below, I thought I would start a thread of pension myths and misunderstandings. Feel free to add yours here, or I suppose, argue why then aren’t myths, after all - this is the internet.

• Annuities are poor value. They used to be but as rates are rising they have become better value again. I managed to get 5.3% at 60 (enhanced) which is well over the safe withdrawal rate.
• DB pensions are backed by a pot of money that belongs to you.
• You need 35 years of NI contributions to qualify for state pension. If you have NI history under the old state pension rules you might need more or less.

https://forums.moneysavingexpert.com/discussion/6687584/iht-mitigations-inheritance-tax

flaneurs_lobster

My favorite, simply because it got the local NextDoor group riled up close to the "mob with flaming torches" stage is:

"State Pension is not a benefit"

Not going to argue this because this forum's members simply know it to be false and, more importantly, don't particularly care.

But anyways, the "I've paid my NI into my pot for 40 years so it's my money not a benefit" was strongly supported.

El_Torro

It's been 4 years or so since annuities "got good". Worth calling out though as people often act on information that is years old.

There have always been downsides to annuities, regardless of the rate. I won't go into that here though as it's not the purpose of this thread.

jaybeetoo

I think annuities are a gamble. Do you feel lucky? I wouldn’t put my whole pension into one. Perhaps 25% max.

QrizB

How about "The job of an (I)FA is to beat the market"? We see that here from time to time.

flaneurs_lobster

I think annuities are a gamble.

How so? Are they not the absolute opposite of a gamble - guaranteed payments for life for x cost.

jaybeetoo

If you die after 5 years that’s very poor value. If you’re invested instead you get to pass it all on.

eskbanker

https://forums.moneysavingexpert.com/discussion/comment/82180545#Comment_82180545

Surely they can be said to be a gamble in the same way that a fixed term savings account is, i.e. the gamble is whether or not the guaranteed return is better than what would have been achieved without committing?

Albermarle

Another common myth is ' By the time I get to state pension age, it will have disappeared'

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/82180545#Comment_82180545

Annuities are backed by guarantees from the FSCS so there's no risk from the insurance company going broke. The only risk is your longevity.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82180550#Comment_82180550

Bit like arguing that an annuity is a gamble because if instead I had put the £200k on red and had won……