One in five people 'not bothering' with their pensions, survey shows

Results from a survey of more than 2,000 people in the UK, carried out by Expert Pension Claims – a company that deals with mis-sold pension and investment complaints – paint a worrying picture of people’s understanding when it comes to retirement savings.

Once the employee is ‘sold’ on the idea they are much more receptive to the technical information

Darren Laverty, Secondsight

Of those surveyed, 37 per cent said they do not know how to access their pension pot. 

Many savers are members of more than one pension scheme, and this is something the pension dashboard initiative may help with. 

But the majority of the survey’s findings point towards a need for improved awareness across the UK about how pensions work and the importance of saving for retirement.

For example, 24 per cent of male respondents said they believe their pension contributions are a total waste of money, compared to 16.4 per cent of women. 

But more than a quarter of women think that pensions will not exist by the time they reach retirement. 

Nearly 19 per cent of people are “not bothering” with their pension because they do not think there is any point. 

Moreover, only 27 per cent of 21-30-year-olds know how much money they and their employer are putting into their pension pots each month. 

The results showed more than 38 per cent of savers in Yorkshire and the Humber knew how much they were putting towards retirement along with their employer, compared to only 22 per cent in the South West and 26.8 per cent in the East of England. 

The research also revealed several pension concerns, with almost half of the survey respondents (47.6 per cent) worrying they will not have enough money to last them through retirement. 

A quarter of savers said that pensions will not exist by the time they reach retirement, and one in four people were concerned that they will die before they can draw their pension.

Do not get too technical

Caroline Anstee, a pensions expert and independent financial adviser, argued that financial education is the key to allaying savers’ concerns and helping them plan for the future. 

“If more financial education was available then everybody would understand more and therefore not worry as much,” she said. 

She added that, “unfortunately, most people do not address the future, so when they get to making decisions about retirement [they] have left it too long”. 

Darren Laverty, partner and financial wellbeing strategist at Secondsight, said: “These are shocking and worrying statistics. Our business has educated and advised tens of thousands of employees about their pension over the last 14 years and I cannot think of a single individual who after that process thought that pensions were a ‘waste of money’.”

He agreed that increased financial education would help resolve some of these issues.

“However, unfortunately the majority of employers cannot afford to pay for this education and advice to be delivered thoroughly and this has led to the situation we now find ourselves in,” he said.   

According to Mr Laverty, the most effective type of financial education “is one that focuses on an employee’s motivation at retirement first and then the provision of technical pensions information second”.

He argued that an employer’s role should be to educate with a focus on why someone should save rather than to provide the saver with lots of technical information.

“Once the employee is ‘sold’ on the idea they are much more receptive to the technical information,” he said, adding that “the industry tends to deliver the technical info before people have actually made the emotional decision to save”.

Teach younger people about pensions

Statistics published by Portafina this month showed that 92 per cent of people aged 18-24 think they would be better off financially if their school had provided financial education, and nearly half of school leavers wish they had been taught about pensions.

Mr Laverty said that the same goes for schools: “Pupils won’t want to listen to techy info, they need persuading that short, medium and long-term saving is a good idea and hopefully these lessons will lead to giving them a better financial life.”

Jamie Smith-Thompson, managing director of Portafina, highlighted that pensions are the most powerful savings tool most people will ever have.

“So, the fact that half of Brits fear they won’t have enough money to survive on after finishing work, or that many people think pensions are a waste of money, is deeply worrying,” he said.

There are two main areas that need address, according to Mr Smith-Thompson.

He said that, firstly, it is important to make pensions simpler to understand and access.

“This is down to us as an industry, which includes regulatory bodies and the government. Financial matters are hard enough to engage with, for many reasons, without people being faced by pages of jargon, complex technicalities and a myriad of changing rules,” he said.

He also stressed the need for more financial education from a younger age. “This is something schools could really help with, and it could have a massive impact on the financial future of our country. Especially with pension poverty,” Mr Smith-Thompson added. 

The power of inertia

That 27 per cent of 21-30-year-olds and 33.7 per cent of 31-40-year-olds surveyed said they know how much money they and their employer are putting into their pension pots each month is not necessarily surprising. 

More than 10m employees have now enrolled in workplace pensions due to auto-enrolment, which relies on inertia to help more people save for retirement.

If the pension contribution money that is taken from employees’ pay went straight into their bank accounts, they may not consider putting money into a pension. 

“It is this behaviour change that could make a considerable difference... none more so than for those in their twenties and thirties who will reap the biggest benefit from the increases in auto-enrolment contributions from employees and employers,” Mr Smith-Thompson said.

But greater awareness of the importance of pensions may encourage these cohorts to contribute more and take advantage of a longer period of investment growth by saving as much as possible as early as possible.