Nearly one in five (19%) of workplace pension holders have no idea what happens to their pension contributions, with 8% thinking their pension is saved in a bank account, according to the research from Royal London.
Whilst personal pension holders were slightly more knowledgeable, 7% still said they have no idea what happens to their contributions and 11% thought they are saved in a bank account.
The pension provider and asset manager surveyed over 2,000 UK adults and found just under a quarter (24%) of those with a pension saw themselves as an investor. Women were less likely to consider themselves as an investor with only 17% who classified themselves this way in comparison with 31% of men.
Half of the pension holders surveyed admitted they never looked at where their pension contributions are invested. Almost one in ten (9%) said this is because they did not realise this information was available, while another 11% said they did not know how to access it.
Over a quarter (27%) of workplace pension holders said they were unaware they could change how their pension was invested. Personal pension holders were more knowledgeable with only 15% saying they were unaware they could change their investment strategy.
The lack of awareness around what can and cannot be controlled and amended when it comes to pensions is particularly concerning at a time when pension scams are at a high. The FCA and The Pensions Regulator launched a joint football-inspired campaign in August to warn pension savers of the dangers of pension scams as losses to scammers topped £30m since 2017. The FCA said many victims fail to spot the signs of a scam and do not know how much is in their pots.
When it came to ESG investing, the survey showed that pension holders were not familiar with the terms used but said it was important to them. Only 16% were familiar with the term ‘responsible investment’. However, once they had it explained to them, over half (56%) of those surveyed said it was important their contributions could be invested in this way.
Several financial adviser and wealth management trade bodies have recently launched ESG training courses and qualifications to help Financial Planners explain responsible investment to their clients.
Commenting on the research, Lorna Blyth, head of investment solutions at Royal London, said: “Auto-enrolment has brought millions more people into pensions but these results show we still have a long way to go to engage people and this has prompted us to launch a new campaign – The Secret Life of Pensions - to empower people and narrow the engagement gap.
“If people don’t understand what a pension is then they cannot make the informed decisions that will help them get the best outcomes in retirement. What is positive though is when people become more aware of things such as responsible investment they do become more engaged. Contributing to a pension means people can not only benefit from the effect of long term investment, they can also ensure their contributions are invested in a way that reflects their values. We must work to ensure people understand the powerful impact their pension can have.”
Royal London surveyed 2,065 UK adults in August 2020.