Around 44 per cent of over-55s are unaware that their pension offers a selection of investment funds, while almost a third of all workers are unaware that their pension is invested at all.
According to a recent study of more than 2,000 working adults with defined contribution workplace pensions, 38 per cent of respondents didn’t know there was a variety of investment funds to choose from, a percentage that increased to 44 per cent for people over 55.
Almost half or 49 per cent of all workers do not know what investments are included in their pension while 29 per cent of respondents are unaware their pension was invested at all.
Wealth at Work director Jonathan Watts-Lay says: “It’s worrying that our research shows that many people don’t realise that a pension is an investment, or even that they have a choice over how their money is invested in their pension. Particularly concerning is that this worsens for those approaching retirement (age 55+), as at this point people need to consider how they plan to generate a retirement income (i.e. take it as cash, buy an annuity, go into drawdown or a combination of options) and ensure their pension investments or ‘glide path’ is aligned with this.”
“In order for people to better prepare for their financial future, it’s vital that they engage with their pensions as early as possible. Many leading workplaces empower their employees with financial education and guidance via financial coaches to help them build understanding and engagement around their pensions and the options at-retirement.
“Our experience shows that interactive financial education workshops are far more engaging than passive information on a website or leaflet. Earlier on in an employee’s career financial education should cover how pension schemes work, employer and employee contribution levels, tax relief, what funds they can select from, as well as how they can change the funds their pension is invested in.
“Later on, around mid-career, employees will also need to understand if their pensions and other retirement savings are on target, as well as how income may be generated in retirement and ensuring investments are being managed in line with this e.g. their investment glide path. Then once at-retirement, financial education or one-to-one guidance should help employees understand how to generate an income from their pensions and other savings, as well as how to seek further help including regulated financial advice.”