Too many still in the dark on pensions

It is the single biggest asset that most people will ever have, and yet a new survey has shown that well more than a third of UK adults don’t understand their pension and its benefits.

The poll of 1,000 employees by YouGov on behalf of financial services firm Drewberry found that 41 per cent of those questioned don’t know how much they put into their pension or what they will get out of it when they retire. An even higher proportion don’t have a proper grasp of the tax relief benefits of making pension contributions.

It’s been nearly 10 years since large employers were first required to automatically enrol all qualifying staff in a workplace pension scheme, while small and micro employers were brought into the reforms between 2015 and 2018. This has been widely regarded as successful in getting more people to save for their retirement, with a tenfold increase in membership of defined contribution schemes between 2011 and 2019.

But if employers have a legal duty to prompt staff to save, should they not also be required to better explain what it is that people are signing up to? Are pension providers adequately explaining entitlements and processes?

Of those surveyed for Drewberry, 87% said they were paying into a workplace pension, yet 41% didn’t know how much was being taken off their pay packet each month to go into their pension pot. Nearly a third (29%) didn’t think their companies paid in enough, while 34% believed they themselves weren’t contributing enough.

More than half wanted to know if they were saving enough for their retirement, and one in three said they wanted to talk to a financial advisor – paid for by their employer – to allow them to better comprehend their pension and how it works.

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People have a right to know all the details of their workplace pension, and to fully understand how it works and what they will eventually get to support themselves when their career is finished. It speaks volumes that nearly a third of survey participants – 27% – believe their employer is purposely keeping them in the dark about the amount of their contributions.

Given that people are living longer, such information has never been more important. This is particularly true now as the cost-of-living crisis pushes ever more pensioners into poverty.

There is talk of expanding the scope of auto-enrolment to bring in even more workers. Any such overhaul should also include provisions to educate staff on how their retirement plan works.

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