The pensions quiz: How much do you really know?

A lot has changed with pensions over the years.

From the well-publicised pension freedoms to increases in the State Pension age, there can be a lot to get to grips with.

In some cases, such as the freedoms, the changes introduce new flexibilities and more choice. It’s also important to have a good understanding of your pension, as there’s huge opportunity to improve its performance and ultimately achieve the future that you desire.

It also goes without saying that the more you know, the more you can protect your hard earned savings.

Take our quiz: What do you really know?

You won’t find any trick questions or financial jargon here, just 10 quick questions that put your knowledge to the test. Answers are given straight after – but no cheating!

1 pension

You can take money from a private pension from the age of 50

  • True
  • False

2 pensionA tax is applied if your pension is worth more than £1 million

  • True
  • False

3 pensionIf you have a pension worth £50,000 and reduce the fees by just 1%, how much extra could it grow by over 20 years?

  • £500
  • £1,000
  • £5,000
  • £15,000
  • £25,000

4 pensionIf you retire at 60 you can claim your state pension?

  • True
  • False

5 pensionHow much of a pension can usually be taken tax free?

  • 25%
  • 50%
  • 75%
  • 100%

6 pensionA pension can be opened for a baby

  • True
  • False

7 pensionOver time a pension should give you more money than if you had saved only in cash

  • True
  • False

8 pensionMoney held in a pension is usually exempt from inheritance tax

  • True
  • False

9 pensionWhen you reach the minimum age to access your pension, what are you allowed to spend the money on

  • Clearing debt/mortgage
  • Holidays
  • Home improvements
  • Charity
  • Reinvesting
  • Whatever you like

10 pensionYou would get tax relief with which of these products, helping your money grow faster

  • ISA
  • Pension

How many did you get right?

Do you think you’re a pensions guru or do you need to brush up your knowledge? Settle down and carry on reading, because you’re about to find out how much you really know:

Q1: False, the earliest age is 55 (except specific workplace pensions that may have their own age)

Q2: True, it’s called the lifetime allowance and is triggered at ‘events’, including when you die and when you take money out of your pension. The tax only applies to money that’s over the threshold, not your entire fund.

Q3: The pension would grow by an extra £25,000, assuming a £50,000 sum at the outset, growing at 6% per year before charges of 0.5% and 1.5% are applied. This really highlights how one change today could have a huge impact on your future – and why it’s so important to understand your pension.

Q4: False. You can only start claiming the state pension from a specific age. By the end of 2018 this will be 65-years-old for both women and men.

Q5: 25%. The rest is taxed as income when it is withdrawn.

Q6: True, anyone can have a pension. When it comes to babies and children, though, an adult will need to open the pension for them.

Q7: True. The key word here is should. History shows us that over a long period of time money invested in pensions is usually worth more than had it been saved as cash. We can’t predict the future, though. So, while we expect this pattern to continue, we cannot guarantee that it will.

Q8: True. Money held in a pension is not counted as part of a person’s estate and is therefore not subject to inheritance tax. Beneficiaries might have to pay income tax, though, depending on a number of factors including the age of the benefactor and the type of pension they have.

Q9: Whatever you like. The money you take out of a pension is yours to spend, like any other money you have. The only restriction is on what the government calls ‘pension recycling’, where tax-free money is taken out of a pension and then put back into a pension to receive tax relief.

Q10: Pensions offer tax relief – a hugely powerful incentive. For the money you pay into a pension, the government will add on any tax you have already paid on it. For basic rate (20%) tax payers this happens automatically. If you pay a higher rate of tax you must claim the extra 20%/25% back from HMRC.

What can you do with your pension?Pension Information guide

With tax relief, tax-free cash and the potential for employer contributions, pensions are possibly the most effective savings vehicles around. Having the right one could unlock the future you really want. This is why it’s so important to understand where your pension is now, so that you can benefit in the future.

We’ve put together a handy, free guide to help you get a better understanding of your pension. Click below to claim yours and find out:

  • The difference between personal and company pensions
  • What the financial jargon really means in plain English
  • Why a simple, no-obligation review could change your life

Thinking about taking money early from your pension?

For some people it’s the right to do; for others it could seriously affect their life further down the line. That’s why it’s so important to get the right kind of advice before you make any decisions.

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Call 0800 304 7288 for a friendly chat about your pension

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Important Information

Taxing matters: tax is mentioned a lot in this quiz. It’s worth remembering that tax treatment depends on your individual circumstances and is subject to change.

The details provided in this article are for general information only and are in no way deemed to be financial advice. All of the material is correct as of the publication date, but could be out-of-date by the time you read the article. For our latest information and news, please see our articles section:

We are really looking forward to reading your comments. Before you start writing, please just remember that everything you write will be displayed publically – including your name. Not sure what sort of thing you can write, and what sort of things you should avoid? Please have a quick read of our social rules for guidance.

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