Only 1% understand the full range of options available to them on retirement
UK200Group member comments on the somewhat unsurprising views of pension scheme members.
Tom Freeman, Partner at UK200Group member firm Price Bailey takes a look at the revealing views of pension holders following on from research undertaken earlier this year.
Pensions and securing your financial future has become a “hot potato” in the press, grabbing headlines more and more frequently.
Our research we conducted with 2,017 pension scheme members earlier this year with Ipsos MORI perhaps highlighted the somewhat unsurprising views of pension scheme members.
Whereas there were some positives to be taken from the report such as, 55% of members said they had an active interest in their pension savings, this was often overshadowed.
In fact, over half of those with an “active interest” did not feel confident that they have the knowledge they need to make fully informed decisions about retirement. This was particularly the case amongst women.
Only 42% of pension members actually know the most basic part of their retirement strategy, which is what type of pension they are a member of. While just 1 in 10 members felt “very confident” that they have the knowledge they need to make informed decisions when planning for retirement.
Around half of pension members in a defined contribution scheme (i.e. not final salary) do not understand the more complex issues of the fees charged by their pension scheme or what these pay for. Similarly, 65% of these members do not understand how their pension money is invested – although half of all members felt it was important that their funds were invested ethically.
For those in the financial service profession, this information presents both good and bad news. It is great that many members are interested in their pensions. However the areas where there is a lack of understanding and knowledge should be concerning for employers and those in government. These knowledge gaps lead to a complete drop in engagement, and it is therefore unsurprising that members said that the customer service they received from their pension provider was just as important as the subject of fees and investment returns.
Do members understand what retirement will look like?
Many look forward to retirement, but interestingly, the data shows that over a quarter of members have no idea how long they might need an income for in retirement, and over half of members underestimated this dramatically (both statistics based on average life expectancy figures from ONS 2014).
Similarly, when asked what sort of private pension savings would be required to get a total income of around £25,000 per year in retirement, over 61% of members underestimated this figure, with the average guess of all members being less than half of what would be required.
With such a gap in understanding, it is no surprise that there is such a concern that people are not saving enough for retirement, and that employers are facing the issue of an aging workforce that is not able to afford to stop working.
All of the above is concerning, and leads to a huge barrier for the majority of members to get over to become fully engaged in their future finances, and the human response to this is often to decide to worry about it later and hope it will be okay. It is clear though that ignoring the problem will not make it go away.
To read more about the views of pension scheme members and discover more statistics, you can download the report for free at http://www.pricebailey.co.uk/pensions-report
. For Pension Trustees we also have further advice to help get the most for you members, available here http://www.pricebailey.co.uk/services/pensions/trustees
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