The truth behind 5 pension myths that could limit your retirement income

Retirement is potentially one of the most significant milestones in your life, so understandably, you might feel pressured to get things right.

With so much information available about pensions, planning, and retirement income, it’s easy to feel overwhelmed. Or worse, you may unknowingly subscribe to common myths that could harm your long-term financial security.

A recent study from Aviva highlights just how common these misconceptions may be. While more than half of UK adults said they’re knowledgeable about pensions:

• Only a third can correctly identify a defined benefit (DB) or defined contribution (DC) pension
• More than half don’t know that the government contributes to pensions in the form of tax relief
• 20% don’t know the type of pension they have.

This lack of clarity could mean you fall short of the retirement income you need, forcing you to scale back on your lifestyle.

Alternatively, you may be overly cautious and save more than necessary, which can affect your current standard of living.

To help you avoid either scenario, continue reading to discover five common pension myths, and how they could affect your retirement income.

1. “My employer has enrolled me in a pension scheme so I don’t have to worry about it”

The government introduced auto-enrolment in 2012, an initiative that legally requires your employer to sign you up for a workplace pension scheme.

Just because this is the case, doesn’t mean you should sit back and not review your workplace scheme.

As of 2025/26, current auto-enrolment rules state that both you and your employer contribute to your pension. The minimum contribution thresholds are:

• 5% from yourself (4% from your salary and 1% from tax relief)
• 3% from your employer.

It’s vital to remember that these contribution thresholds aren’t static, and you can always increase the amount of your salary that you can move to your workplace pension.

Better yet, your employer may also agree to match your contributions, further bolstering the value of your fund.

This would significantly increase the overall size of your pension, meaning you may be more likely to be able to support your desired lifestyle in the next phase of your life.

2. “The State Pension will fund my retirement”

The State Pension is undoubtedly a valuable source of wealth, and it can even form the bedrock of your retirement income.

However, it’s worth noting that it isn’t the most significant sum of money, and you may not be able to fund your desired lifestyle if you rely solely on it.

As of 2025/26, the new full State Pension is worth £230.25 a week, equal to £11,973 a year.

Meanwhile, the Pensions and Lifetime Savings Association states that a single person might require a yearly retirement income of:

• £13,400 for a “minimum” retirement
• £31,700 for a “moderate” retirement
• £43,900 for a “comfortable” retirement.

Instead, you could use the regular and guaranteed income from the State Pension to cover your day-to-day costs, while your other sources of pension wealth fund more significant expenses, such as holidays or home renovations.

3. “I have rental property, so I don’t need a pension”

A rental property is a practical way to supplement your retirement income. Still, this might not be enough to fund your desired lifestyle.

The Office for National Statistics reveals that the average monthly private rent in the UK stood at £1,369 in the 12 months leading to December 2024, equating to £16,428 a year.

If you have multiple properties, this might seem like a substantial sum of money, and it could, at a stretch, help fund your retirement.

Still, the figures mentioned previously indicate that you may need far more yearly savings than you initially think.

If you want to live a comfortable retirement, it may be prudent to use other sources of pension wealth.

4. “My income needs will remain the same throughout retirement”

You may believe that you will need a certain income every year in retirement, and that will last you until the end of your life.

However, this isn’t the case, as your retirement spending tends to follow a “bell curve”.

Indeed, during the early years of retirement, you may spend far more as you tick off considerable activities from your bucket list, such as a dream trip around the world.

Then, as you settle into a routine, you may find you start spending less.

Your income needs could then rise again as you enter later life, especially if your health deteriorates and you require care.

This can be expensive, too, with carehome.co.uk revealing that, as of 6 June 2025, the average yearly cost of residential care for self-funders is £67,132, or £80,340 for nursing home care.

If you don’t account for these costs, you may end up drawing unsustainably from your pension in the early years of retirement, resulting in a shortfall in the future.

5. “I don’t need to access financial advice before drawing from my pension”

Perhaps one of the more detrimental myths regarding your pension is that you don’t need to seek advice before you draw from your retirement fund.

This is seemingly a considerable regret of those who have already retired.

A survey reported by FTAdviser reveals that 58% of respondents accessed their pension without seeking any formal advice. Around 1 in 7 later regretted doing so due to fears of overspending or running out of money.

Drawing too much from your pension in the earlier years of retirement could mean you prematurely exhaust your fund and are unable to pay for your lifestyle.

If you’re too cautious, your loved ones could face a larger-than-expected Inheritance Tax bill when you pass away. This is especially relevant now, given that pensions are set to be included in the value of your estate from 6 April 2027.

Please get in touch by emailing info@lloydosullivan.co.uk or call 020 8941 9779 to see how we can assist you and alleviate any pension misconceptions.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The Financial Conduct Authority does not regulate tax planning.