Pension planning: 4 pitfalls to avoid

Pension planning: 4 pitfalls to avoid

This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice regarding your affairs please consult an independent financial adviser.

When it comes to retirement planning, pensions are almost always going to be a crucial tool – especially due to their tax-saving benefits. Yet pensions come in many different forms with lots of varying rules and intricacies that can lead people to make mistakes when they do not have the ongoing help of a financial adviser.

Below, our team at Cedar House offers a round-up of 4 common pension planning mistakes that people make in 2021-22. We hope you find this content useful. If you’d like to find out more or discuss your own financial plan with us, please contact our team for more information or to access personalised financial advice:

020 8366 4400 or


#1 Neglecting your state pension

As mentioned, there are different types of pension in the UK including your state pension, your workplace pension(s) and possibly private pensions. Your state pension provides a lifetime income once you reach your state pension age, guaranteed for life and linked to inflation (so it rises as the cost of living goes up). This is a very powerful type of pension, but sadly many in the UK do not use it to its full potential.

First of all, in 2021-22 you need at least 10 qualifying years of National Insurance Contributions (NICs) on your record to receive any state pension at all. A minority of people may, therefore, miss out completely if they have had a long career break – e.g. people who worked abroad for a long time and did not pay into the National Insurance system. More commonly, however, people often do not have a complete NIC record to get the full new state pension. Here, you need at least 35 qualifying years of NICs under your belt. Make sure you check this well ahead of your retirement so you have time to make up any shortfall.


#2 Relying on property & inheritance

There is a common perception amongst UK adults that their retirement income needs can be largely met by accessing equity in their property, or by relying on an expected future windfall – especially an inheritance. As financial planners, we need to say that you cannot rely on these two things to fund retirement. An inheritance may not transpire at all – or if it does, it may not be as large as you hope, or come when you expect. Your property, moreover, is usually best seen as a “backup” source of equity if you absolutely need to access it (e.g to help fund your long term care). You cannot predict your property’s value in the future, whether you will be able to sell it when you want and what moving could mean for your wellbeing in retirement. Having other sources of retirement savings and income, therefore, opens up more options for you.


#3 Assuming the state will support you

We are lucky in the UK to have cultural icons like the NHS which are dear to the population, and which can be relied on to help look after us. Sadly, however, many people assume that the state will meet their income needs in retirement – similar to how it provides “free” healthcare. This is not the case, despite your state pension (which likely will form an important part of your income in retirement). To ensure you can support your lifestyle in “life after work”, you need to also take responsibility to save and make preparations yourself. This is part of the reason why the UK government obliges employers to enrol new staff onto a workplace pension (via PAYE and the auto enrolment scheme), which is intended to encourage businesses and individuals to take on more of the burden for retirement planning.


#4 Not starting early enough

The longer you leave saving for retirement, the higher the strain is likely to be on your finances as you approach the end of your career. This is because you have less time to make monthly savings, and less time for compound interest to work its immense power to grow your portfolio. This is why it is never too early to start planning for retirement – even for those in their 20s who are just starting out in their careers. Generally speaking, the sooner you start savings for your retirement, the less you need to put aside each month to achieve your desired lifestyle in the future. In 2021-22, employers are required to contribute at least 3% of your salary’s value into your workplace pension, whilst you (the employee) must put in at least 5%. This is a good start, but bear in mind that it may not automatically carry you to arrive at your retirement goals. You may need to save more – or into alternative investments – to get on track. Here, an experienced financial planner can help you review your current situation and strategy to help ensure that you have the best chance of moving towards your ideal retirement.



Interested in discussing your financial plan with an experienced financial adviser? Get in touch today to discuss your financial plan with a member of our team here at Cedar House via a free, no-commitment consultation:

020 8366 4400 or


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