Tax, investments and pension rules can change over time so the information below may not be current. This article was correct at the time of publishing.

How employees can avoid pension pitfalls in UK

The average person has 11 jobs in their lifetime*. Auto-enrolment regulations mean that employees typically start a new pension with every employer. This can make it hard for employees to manage their pensions effectively and they may not know where their pensions are invested, how much they are worth, what charges they are paying or even what provider it is held with.

At Four Wealth Management, we offer a no-obligation review of all your existing pensions with one of our financial advisers. Your financial adviser can look into all of your existing pensions and help employees to understand if their pensions are on track to meet their retirement goals, and if not how they can achieve them. They will also let you know if the underlying investments are suitable for your individual circumstances and in line with your attitude to risk. Typically, workplace pensions are automatically invested in a tracker fund and it is up to the employee to change this or invest their pension in more suitable funds.

Recent FCA data showed that the majority of people who are accessing pension benefits are aged 55-64 and most cash in their pension pot in full. 90% of all pots fully encashed are under £30,000**.

48% of pensions accessed in 2018/19 were taken without the employee seeking financial advice beforehand. This means a lot of people will be paying more tax on their pension savings than they need to. Tax planning should be taken into consideration when making any pension transactions. The first 25% of the amount that is withdrawn from your pension pot is tax free. The remaining 75% is taxed at your marginal income tax rate.

If you cash in your entire pension pot in a year when you are still working, 75% of the amount withdrawn will be added to your earnings that tax year and may push you into a higher rate tax bracket than normal meaning you will pay more tax than you would have needed to if you had staggered the withdrawals.

Another benefit of keeping your assets inside of the pension wrapper is that it is outside of your estate for Inheritance Tax purposes. If you withdraw all of your pension assets and simply add it to your savings, it will form part of your estate which will then be subject to Inheritance Tax when you die.

At Four Wealth Management, we offer employers access to our complimentary Workplace Financial Education programme which aims to educate your employees on their pensions meaning they are more likely to make informed decisions when it comes to taking an income at retirement. Workplace Education seminars last approximately one hour and can be run online or at your workplace.

Find out more about Workplace Financial Education

Alternatively, employees can book a no-obligation pension review to review their existing pensions and find out the most tax-efficient way to receive income at retirement.

Book a no-obligation review of your existing pensions


The value of a Pension will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.

The levels and bases of taxation, and reliefs from taxation, can change at any time. The value of any tax relief depends on individual circumstances.

*Gov UK, 2014 ‘Thousands more make contact with long lost funds’

**FCA, Retirement income market data 2019/20

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If you have any queries or would like to arrange a face to face meeting with an adviser for a no obligation review of your personal finances, simply book a call back using the form below. Alternatively, you can call us on 0117 973 0500.

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