Are you risking your retirement savings? Experts reveal the most common pension pitfalls – and how to fix them before it’s too late.
With pensions often taking a backseat in financial planning, millions of Brits are making simple mistakes that could cost them thousands in retirement. We spoke with Lisa Picardo (PensionBee) and Claire Trott (St. James’s Place) to uncover the top pension blunders – and how to avoid them.
1. Losing Track of Your Pension Pots
The Problem:
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1 in 10 UK workers have lost a pension pot (4.8 million forgotten pensions).
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Auto-enrolment means new workplace pensions with every job change – leading to scattered savings.
The Fix:
✅ Consolidate pensions into one pot for easier management & lower fees.
✅ Use the Pension Tracing Service to find lost pensions.
2. Missing Out on Free Employer Contributions
The Problem:
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Under auto-enrolment, employers must contribute at least 3% of your salary.
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Many offer matching contributions (e.g., if you pay 5%, they’ll pay 5%).
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Opting out = turning down free money!
The Fix:
✅ Always contribute enough to get the full employer match – it’s part of your pay package.
✅ Check if your employer offers salary sacrifice schemes (extra tax savings).
3. Starting Too Late or Contributing Too Little
The Problem:
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Delaying pension savings reduces compound growth (the ‘magic’ of long-term investing).
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A £200/month contribution at age 25 could grow to £400k+ by 65 (vs. £150k if started at 35).
The Fix:
✅ Start early – even small amounts add up over time.
✅ Increase contributions with pay rises (e.g., put half your raise into your pension).
4. Not Claiming Higher-Rate Tax Relief
The Problem:
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Basic-rate taxpayers get 20% tax relief automatically.
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Higher/additional-rate taxpayers (40%/45%) must claim extra relief manually via:
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Self Assessment tax return
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HMRC tax code adjustment
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The Fix:
✅ Call HMRC to claim backdated relief (up to 4 years).
✅ For one-off contributions, specify they shouldn’t adjust future tax codes.
5. Ignoring Pension Flexibility at Retirement
The Problem:
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Many cash out pensions too early or lock into poor annuity deals.
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Pension freedoms (since 2015) allow flexible drawdown, lump sums, or reinvesting.
The Fix:
✅ Explore all options – 25% tax-free lump sum, drawdown, or mix-and-match.
✅ Get independent financial advice before making irreversible decisions.
Final Checklist: How to Fix Your Pension Today
✔ Track down & consolidate old pensions
✔ Maximise employer contributions
✔ Start early & increase payments over time
✔ Claim higher-rate tax relief if eligible
✔ Plan flexibly for retirement
“The best time to fix your pension was yesterday. The second-best time is today.” – Lisa Picardo, PensionBee
