Pension blind spots mean millions are missing out extra money - and access to their cash

Millions of people are unaware that they can contribute to their pension while on parental leave - while thousands more don't know they can access their pension early if they're severely ill.

The findings also show worrying disparities in the knowledge of workplace savings - with self-employed people also unaware that they can benefit from tax-relief on their pension.

That's according to a new report by the Government's Pensions Advisory Service, which has uncovered the biggest myths that are leaving savers out of pocket at retirement.

Worryingly, women are less likely to know they can keep topping up their pension while on parental leave than men - meaning they could be at risk of a black hole in their income when they finally give up work.

Wages have fallen in real terms by 10.4% with little sign of recovery (Getty)

The research also demonstrates a lack of awareness about the growth of pension savings and what happens to your pension when your employer goes bust. 

"It’s clear that many people are unaware of their options when it comes to important events in their lives that can impact their pensions such as becoming a parent or starting their own business.

"Women in particular have many important financial decisions to make when transitioning into parenthood but our findings suggest they are less likely to be aware of their pension options.

"It is positive to see that people have an understanding of how automatic enrolment works. However, our findings suggest that many might be missing out on important information when making decisions affecting their pensions.

You can speak to a pensions specialist for free, confidential help by contacting The Pensions Advisory Service helpline or webchat."

Common misconceptions

Self-employed people CAN benefit from tax relief on pension savings (Getty)

1. If you are forced to retire early due to severe ill health, you can access your pension early: TRUE

2. You can leave money to grow in pension schemes until you need to access it: TRUE

3. People can start saving into a pension as soon as they have started working, whatever their age: TRUE

4. Self-employed people can’t benefit from tax relief on pension savings: FALSE

5. Money invested in a pension tends to grow at the same rate as you would get in a savings account: FALSE

6. Workers can not contribute to their pension while on parental leave: FALSE

7. There’s no benefit to contributing more into a pension than the amount your employer will match: FALSE

8. If your employer automatically enrols you into a pension scheme, you don’t have to worry about not saving enough: FALSE

9. If you save into a workplace pension and your employer goes bust, you will lose all your money invested in the scheme FALSE

Top tips to knowing your pension

• Continue to make contributions to your pension while on parental leave. Check with your employer how this will work. This will vary depending on whether you’re part of a defined contribution scheme or defined benefit scheme.

• If you’re suffering from severe ill health and wondering what your options are to access your pension, talk to your pension provider. They will be able to explain whether you are eligible to access your pension early.

• If you are self-employed, you could receive tax relief on the amounts you put into your pension so it’s worth making contributions if you can. Further support for self-employed people with their pensions is available through the Pensions Advisory Service who offer a specialist telephone-based appointment service. 

• For free, confidential help from pensions specialists call The Pensions Advisory Service helpline on 0800 011 3797 or visit  www.pensionsadvisoryservice.org.uk.