Myth 1: My Children Will Look After Me; So I Don’t Need Any Pension Account
This is the popular belief. However, if you fail to make financial provisions/savings for your post-retirement life, you will become the extra baggage/pressure your children will have to carry. On the flip side, with a financial plan that will keep you financially independent after retirement, you will be able to afford the kind and standard of life you desire, even after retirement, without recourse to anyone.
Myth 2: You Only Have Access To Your Pension Upon Retirement
This is not true. According to Section 7 (2) of the Pension Reform Act 2014, a worker who voluntarily retires, resigns or is disengaged from paid employment can access 25 percent of his retirement savings if he is unable to secure another job after four months. It gets even better with the Additional Voluntary Contribution (AVC). With an AVC, you can access your savings and the interest accrued anytime you want, before retirement.
Myth 3: My Salary Is Not Enough For My Needs; I Should Not Save For Retirement
Many people, especially low-income earners, grumble at the concept of pension deductions from their salary. They wonder why they should bother about retirement savings when their current earnings are hardly enough to meet their needs. Again, this thinking is erroneous and flawed.
Irrespective of one’s station in life, there is the need to plan for the future because there is a greater probability of things going worse if no concrete plans are put in place to make the future brighter. “He that fails to plan has planned to fail,” they say.
Myth 4: I Will Be Very Rich And Not Need A Pension Account
Don’t we all just want to be rich and famous and not have to worry about a thing for the rest of our lives? Having a dream for fame and wealth is never a bad idea. But, having a backup plan is a better idea. Moreover, a pension account doesn’t hamper one’s quest and pursuit for wealth. In fact, as you grow in your capacity to earn, which is what getting rich is all about, your pension contribution also grows, opening up an entirely new vista of opportunities to you when you eventually retire from active work.
Myth 5: Pension is for the Old
Pension is actually for the young. The whole idea of pension is for you to save up for a financially self-sufficient post-retirement era, while you are young and active. Against the popular misconception that pension is for the old, it is best to start your retirement savings once you get your first paying job. This will have an impact on what your pension savings and return on investment will eventually amount to by the time you are ready to retire.
Myth 6: My Pension Savings Could Be Lost If I Die
There is also the widely held misconception that pension savings are some sort of public asset, which could ‘disappear’ or get ‘explained away’ when a person dies. This is not true. Contrary to this wrong notion, your pension savings is your personal asset, which you are entitled to pass on to your next of kin. The next of kin of a deceased, or the beneficiary in the Letter of Administration, is the sole person entitled to the pension funds if the pension holder dies before he/she can access the pension savings. The Pension fund managers, or government regulators, have no right or access whatsoever to your retirement savings.
In conclusion, you need to understand that the standard pension savings rate is 18% of your basic salary, housing allowance, and transport allowance (that is 18% of 80% of your total remuneration). Out of this, you are only required to contribute 8% from your salary, while your employer contributes the remaining 10%. In fact, it’s foolhardy to kick against pension savings because you will be losing out the 10%, which is your employer’s statutory monthly contribution to your retirement savings. This contribution will accumulate and eventually add up to something tangible.