Seven Pension Myths and the Truth Behind Them

If we asked what people truly understand about pensions and retirement, they would have a variety of opinions. Some of these beliefs may hold some truth, but many of them are deeply rooted in myths, misconceptions, and outdated information.

In this article we will debunk some very common pension myths, addressing the good, bad, and realities about retirement in general.

Pensions Are Only for Old People

Many people think you only need to worry about pensions when you’re older. In reality, the best time to start planning for retirement is now. While it's never too late to start pension saving, it's equally not too early. In essence, you’re not too young to own a retirement savings account. 

The earlier you start contributing to your retirement, the more time your money has to grow through interest and investment returns. Starting early gives you a head start and helps you build a larger retirement fund with less stress.

Business Owners Don’t Retire

Some business owners assume they’ll work forever, relying on the hope that their business will sustain them in old age. But what happens if the business slows down or you have to step down for reasons beyond your control? 

Entrepreneurs may not benefit from the contributory pension schemes, but they have the Micro Pensions plan that caters to their needs. Your pension plan ensures that, as a business owner, you have a safety net when you’re ready to retire, or if circumstances force you to stop working earlier than planned.

Read also: Making Retirement Plans for Small Business Owners

Only Civil Servants Are Allowed to Have Pensions

This is one of the biggest misconceptions about pensions and retirement. Especially in Nigeria, pensions used to be more common in government organizations. However, today, anyone can have a retirement savings account, including freelancers. 

The 2013 Pension Reform Act allows private-sector employees, entrepreneurs, and even self-employed individuals to participate in pension schemes through micro pension plans. You don’t need to work for the government to plan financially for your retirement. All you need is a trustworthy pension fund administrator (PFA).

Your Pension Fund Is Gone If You Die

What truly happens to a pensioner’s retirement savings if they pass on? Do their pension contributions vanish if they die before retirement? Does pension stop after death?

In reality, pensions do not cease after a pensioner dies. Your pension savings form part of your estate and can be accessed by your named beneficiaries in your will or a next of kin. 

Your PFA is obligated to help you put processes in place to ensure your loved ones receive the benefits you worked hard to save. This transfer of funds is easy and controlled even after death.

Read also: Why You Need a Will and How to Set Up One

I Can Rely on My Children to Take Care of Me in Retirement

Retirement is a long holiday you can only enjoy if you're prepared for it. During this time, your family and friends may assist in setting you up for comfort.

However, it is a cultural norm in many societies to depend on children for support in old age, and this is not always a reliable plan. For one, economic challenges and changing lifestyles may make it difficult for younger generations to provide the level of care their parents expect. 

The only way you can truly be at ease in retirement is by having a pension plan. This way, you’re financially independent and can maintain your lifestyle without placing an extra burden on your children.

I Can’t Afford to Contribute to Pensions Now

Anyone who earns something can contribute to their pension, no matter how small. Your small, consistent contributions can grow significantly over time to become substantial amounts.

Plus, pension plans are designed to be flexible and affordable, especially for self-employed individuals and small business owners. You can contribute according to your income and adjust as your earnings grow.

Accessing Your Pensions is Nearly Impossible

Some people worry that when it’s finally time to access their pension, it will be an uphill struggle. This fear is often a result of stories of poor service or outdated systems in the past. However, with the right documentation and planning, accessing your pension is straightforward.

The pension system in Nigeria today is more transparent and customer-friendly. Your trusted PFA would have clear processes that ensure timely and hassle-free access to your funds once you’re ready. And if you think your PFA is being shady, feel free to report them to PENCOM.

Conclusion

Planning for retirement is important for everyone, whether you're young, self-employed, or an entrepreneur, and you shouldn’t let myths hold you back. Oak Pensions will guide you as you make this important decision concerning your future.

Oak Pensions is Nigeria's leading trusted pension fund administrator, dedicated to helping Nigerians of all ages prepare adequately for a fulfilling retirement. You can get started with Oak Pensions today by contacting their team of experts at www.oakpensions.com  or calling 09087448661.