Pension planning pitfalls for your clients to avoid
Retirement planning: simple in theory, tricky in practice
On paper, pension planning is easy: save regularly, invest sensibly, retire comfortably. In reality? Rules change; careers zigzag, markets wobble, and day-to-day life gets in the way. Even the most organised people can fall into avoidable traps that dent their future income. For advisers, spotting these pitfalls early is a chance to add real value, whether that’s boosting contributions, tracking down old pots, or rebalancing investments. Most mistakes are fixable, often with quick wins.
The most common pension pitfalls
- Starting too late: the earlier a client starts saving, the more compound growth works in their favour. Someone putting away £200 a month from age 25 could end up with more than double the pension pot of someone starting at 45. Advisers can turn “I’ll start next year” into “Let’s start today.”
- Over-relying on the State Pension: the full new State Pension in 2025/26 is £11,502 a year - well short of the £31,300 the PLSA suggests for a moderate retirement for a couple. Advisers can highlight the gap and plan to close it with personal and workplace savings.
- Not maximising employer contributions: turning down an employer match is like ignoring free money. A 5% employee contribution with a 5% employer match doubles the saving instantly. Advisers can ensure clients understand the rules and make the most of them.
- Losing track of pensions: with career moves, it’s easy to misplace old pots - around £26.6bn is currently “lost” in the UK. Advisers can help trace them via the Pension Tracing Service and assess whether consolidation makes sense.
- Assuming minimum contributions are enough: auto-enrolment’s 8% is a solid start, but often not enough for a comfortable lifestyle. Advisers can stress-test contribution levels against retirement goals and suggest top-ups where needed.
- Leaving pensions under-managed: unmonitored pensions risk drifting into unsuitable funds or underperforming investments. Regular reviews keep strategies aligned with life changes and market conditions.
- Trying to time the market: jumping in and out of investments rarely beats staying invested. Advisers can help clients avoid knee-jerk decisions and focus on the long-term plan.
- Not seeking advice early: many only get help when retirement is a few years away. Early advice builds flexibility, reduces risk, and can significantly improve outcomes.
Two clients, two very different pension journeys
Mateo, 35 – Self-employed, late starter
Mateo set up his own design business at 28 and focused on reinvesting every spare penny. Retirement felt a long way off, so he didn’t open a pension until his mid-30s. With no employer contributions, his savings gap was widening fast.
An adviser helped him set a realistic monthly target, make use of personal pension tax relief, and invest in a risk-rated portfolio through Parmenion. They also explained the role of equity in long-term growth, showing Mateo that sensible risk-taking now could achieve far more than cautious saving alone. Now, Mateo’s plan is back on track, and he has a clear view of how much he needs to hit his target lifestyle.
Chen, 58 – Time-poor executive
Chen has built a successful career but never consolidated the five pensions she’s picked up along the way. She also assumed her contributions (set years ago) were still enough.
Her adviser traced and combined the old pots into a single, well-diversified portfolio, adjusted her risk level, and used cashflow modelling to map out different retirement dates. Chen now knows exactly when she can step back from work - and with confidence that her money will last.
How advisers can help clients avoid these mistakes
- Encourage early pension conversations: bring pensions into the discussion at life milestones like a first job, pay rise, inheritance, or house move. Even small early steps compound over decades.
- Highlight workplace scheme benefits: explain employer match rules, auto-enrolment, salary sacrifice, and additional voluntary contributions (AVCs). Clients often underestimate the boost these can give.
- Help clients consolidate old pensions: track down lost pots, review fees and benefits, and decide if combining them improves control and clarity.
- Educate clients about risk: help younger savers understand the role of equity in long-term growth. Target-date funds, for example, maintain high equity exposure well into mid-life. A reminder that sensible risk-taking often outperforms cautious saving. Extra contributions at very low risk can’t match the long-term power of compound growth at an appropriate risk level.
- Use risk profiling and cashflow modelling: show clients how different scenarios - retirement ages, spending levels, market returns - play out in practice.
- Conduct regular reviews: annual check-ins help keep contributions, investment choices, and risk levels on track.
- Emphasise early advice: make pension planning a lifelong habit, not a last-minute scramble.
How Parmenion supports smarter pension planning
- Consolidated reporting: see all client portfolios in one place, including legacy pensions, making reviews and conversations simpler.
- Risk profiling and suitability tools: align pension strategies with goals, timelines, and risk tolerance, while meeting regulatory requirements.
- Model portfolios: Access active, passive, ethical, and retirement-focused options to tailor investments to client needs.
- Efficient onboarding: fast, compliant onboarding means less admin and more time spent giving advice.
Pension planning mistakes are common, but they’re not inevitable. With early engagement, clear planning, and regular reviews, advisers can help clients turn potential setbacks into stronger outcomes.
Parmenion’s tools give you the insight, flexibility, and efficiency to keep your clients’ retirement plans on track and their confidence in your advice high.
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This article is for financial professionals only. Any information contained within is of a general nature and should not be construed as a form of personal recommendation or financial advice. Nor is the information to be considered an offer or solicitation to deal in any financial instrument or to engage in any investment service or activity. Parmenion accepts no duty of care or liability for loss arising from any person acting, or refraining from acting, as a result of any information contained within this article. All investment carries risk. The value of investments, and the income from them, can go down as well as up and investors may get back less than they put in. Past performance is not a reliable indicator of future returns.
