4 Common Pension Myths Busted

There are a lot of myths regarding pension schemes and advisors, It's time to put the facts first.Everybody loves a good story. While sharing stories is a great way to confer important information to others, such as moral codes, rules, and the need for certain basic skills, not all stories are 100 percent accurate. However, these inaccurate stories gain popularity in the public consciousness, perhaps because they sound good or seem to make sense.

Unfortunately, when these stories or myths concern important financial decisions such as pensions, they can do real harm to people. This is why Simon Shirley Advisors have collected a short list of the most common myths about pensions to go over with your employees so that retirement won’t catch them unprepared. On top of being the right thing to do, going over retirement planning issues with employees helps to demonstrate your dedication to providing best in class benefits, driving employee engagement and retention.

Myth #1: Retired Employees Won’t Need as Much Money

Many employees who aren’t familiar with retirement planning seem to think that they’ll have fewer bills to pay after retirement. While some work-related expenses might go down, leisure-related expenses tend to go up, and basic living expenses won’t go away just because they’ve retired.

This is why it is important to, at some point, sit down with employees and review their retirement plan and goals. When do they want to retire? How do they see themselves living? What is their current cost of living? It is vital that the employee answers these questions well before he or she approaches retirement age.

On top of everything else, keeping in mind the rate of inflation for an employee’s retirement plan is also helpful for calculating their post-retirement cost of living.

In most cases, an employee will be making significantly less money after retirement than he or she was before leaving the workforce. If left unprepared for retirement, employees may be left unable to pay their basic living expenses without working after reaching retirement age.

Myth #2: Taxes are lessened after Retirement

Here’s another myth that gets people blindsided after retirement. Retirement income is still taxed according to each person’s income tax bracket (with some exceptions). Since many retirees make less money after retirement, they may, in fact, move to a lower tax bracket, but this is not guaranteed.

When an employee reaches retirement age, it is important to calculate the value of their pension plan(s), and see how much income they would receive each year from this. This can help to estimate their tax bracket upon retirement, so they know how much to set aside for taxes each year.

Myth #3: All Pension Funds are guaranteed

While investment funds are great, they don't always pay out what employees pay in.Many employees operate under the misconception that their pension plan is guaranteed to grow by a set percentage by the time they retire. 

However, in reality, many corporate pension plans consist of an investment portfolio for each employee, which can fall as well as rise in value.

These investment portfolios exist in real assets, such as company shares, government bonds and property, the values of which move in accordance with economic and financial cycles and other factors.

Myth #4: Pension Advisors are for the Wealthy

When many front-line workers think of pension advisors or other financial planning experts, they tend to think of well-heeled advisors who cater for wealthy individuals. These employees can believe that the services of a financial advisor is out of their reach.

While some financial advisors do cater to the ultra-wealthy, the services of a pension advisor don’t have to be beyond the reach of your company’s employees.

For example, Simon Shirley Advisors, when we are engaged as an employee benefits advisor for your company, we offer independent financial planning advice, info, and services to your employees at no additional cost to you. This includes pension advice and information.

This way, your employees can benefit from the services of experienced employee benefits advisors, and you can get on with your day as someone else helps your employees sort out pension fact from pension fiction.

Learn more about employee pension plans and other major employee benefit options by downloading a free copy of our eBook at the link below:

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