One in eight (13%) workers are unsure if they have a workplace pension and one in three (34%) aren’t sure how to go about setting up a private pension, according to research from Money Saving Heroes.
Of those who are aware of having a workplace pension, just 14% know how much they pay in and only 10% know roughly how much is in their pension pot overall.
Additionally, 56% of Brits aren’t sure how pensions work in terms of when they can access their money and how, the survey found. When asked what it was that confused them, 68% admitted that they didn’t know at what age they would gain access to their pension pot, and 51% weren’t sure if it acted as a separate bank account or would get paid into their current account.
When asked to state when they thought they would be paid their workplace pension the top answers were: in one lump sum (24%), monthly (22%), weekly (20%), as needed (19%), and fortnightly (10%). The remaining 5% admitted that they wouldn’t be able to confidently guess how frequently they would be paid when retired.
Asked if they felt the full basic UK state pension amount of £129.20 per week (or £516.80 each four-week month) was enough to live on, most respondents (89%) felt it wasn’t. Almost half (46%) said it wouldn’t be enough to cover their monthly outgoings, and one in five (19%) said this wouldn't be enough to pay their rent or mortgage.
When asked what the current UK retirement age is for men and women just 15% got this right. Thirty-four per cent thought the retirement age will only continue to increase.
Yesterday (30 July) the Financial Conduct Authority (FCA) proposed measures to protect consumers from transferring out of defined benefit (DB) pension schemes, including a ban on contingent charging for advice. The FCA found that 69% of consumers are advised to transfer, despite its view that most would be better off sticking with their existing scheme. The body estimates that unsuitable pension transfer advice costs consumers up to £2 billion each year.
The move came after chair of the work and pensions committee and independent MP Frank Field called for action on charging consumers for pension advice. He said that former British Steel workers had been exploited by commission-hungry advisers after wide job losses in the sector.
George Charles, a spokesperson for Money Saving Heroes, said there are simple procedures that employers can implement to ensure that workers understand their pension pots. "Employers wanting to ensure that their employees have all the relevant and up-to-date knowledge relating to workplace pensions should aim to keep them as informed as possible by scheduling a meeting, or even holding a Q&A session where everything can be properly explained to them and they can have the opportunity to share any concerns or queries regarding their own financial contributions and the ultimate benefits of the scheme," he told HR magazine.
"There is no need to make it a three-hour meeting; it can just be a quick and simple guide about how much the employer is paying in, what the employees are paying in, and what the government is paying in... As an employer make sure you know how the workplace pension works – you don’t want to be the employer that can’t give its employees the information that they have a right to have access to."
However, campaigner and former pensions minister Ros Altmann told HR magazine that it shouldn't be solely up to employers to increase understanding on pensions. "I don’t believe that it is employers’ duty to help workers understand pensions – surely that is the responsibility of the government and the pensions industry? Employers themselves need educating in many cases. I think it is time for the pensions industry itself to start helping its customers understand pensions and that would be a great way to encourage them to contribute more if they want to," she said.
She added that the government and pensions providers should work with employers to improve financial education: "The pension firms keep complaining that people are not paying enough into their pensions but are not taking the opportunity of auto-enrolment, which is facilitated and significantly funded by employers, to engage workers and help them understand what an excellent product they can be.
"Relying on jargon and old-fashioned processes is not the way to get young people or anyone else to feel good about their pensions. The government and regulators should ensure that companies providing workplace pensions can help improve understanding."
Almost 2,500 Britons were polled by Money Saving Heroes, all aged 18 or older and in full-time employment.