The pensions industry has been urged to educate the public about pensions following the identification of five savers misconceptions.
Pensions adviser Portal Financial said these misunderstandings involved issues such as tax, income and death benefits.
The five misunderstandings are:
1. Taxable pension income. Portal Financial said savers did not understand income received was assessed against all taxable income for the year.
2. Tax-free cash. Under new pension reforms introduced in April, people are allowed to take the first 25% of their pensions free of tax. But the firm said people thought after withdrawing the first 25% they could take out another 25% tax-free next year.
3. Income. Portal Financial said savers were unaware they could start taking an income from their pension before they reach state pension age, currently set at 65. Under the reforms, savers are allowed to withdraw income from their workplace pension once they reach 55.
4. Transferring out. Depending on the scheme, savers may need to transfer out of their scheme to release money, including tax-free cash. However, the firm said savers were unaware of this fact.
5. Death benefits. People are aware certain annuities provide a pension to a spouse when they die, but they are unaware drawdown and unused funds can also be left to beneficiaries.
Jamie Smith-Thompson, managing director at Portal Financial, stressed the need to educate the public and encourage them to save.
He said: "Despite the increased level of debate around pensions following recent reforms, people are still confused. As an industry, we must find a way of providing clearer guidelines and more comprehensive information."
