Pension confusion leaves millions of savers worried they won’t have enough to retire on

– 18 million Brits have never reviewed their retirement savings plans
– 12 million pension holders don’t know how much they have in their pot for retirement
– 11 million people don’t expect to have enough money when they retire
– Brits are 17 times more likely to check they’re getting a good deal on their car insurance than they are with their pensions

Millions of Brits face a pensions timebomb with no idea if they’ll be able to save enough for retirement. 18 million people have never reviewed their plans for retirement, new research from investment platform EQi has revealed, and more than 11 million admit they don’t expect to have enough money when they do retire.

In fact, people are more likely to review their car and home insurance costs, energy suppliers, savings rates and even their mortgages on regular basis than they are their pensions, despite pensions probably being their most valuable and important financial commitment.

The total value held in pensions rose from £2.9 trillion to £6.1 trillion[1] over the last ten years, thanks largely to the introduction of auto enrolment workplace pensions, according to research for EQi by the Centre for Economic and Business Research (Cebr). But this means many workers now have retirement savings spread over a number of different pensions pots, with no idea of how they are performing or how much they are being charged in fees.

EQi found that 12 million pension holders don’t know how much they have accrued for retirement. Worse still, 14.8 million of those holding individual pensions don’t how much they are paying in fees, which could rack up to a significant amount of money over time considering the average worker will have 11 jobs in their lifetime[2].

In fact, only 1.4 million pension holders said they review or switch their pensions at least once a year, according to EQi’s research. This is compared with the 24.4 million estimated to review their car insurance annually or the 5.7 million people who said they review their savings at least once a year, according to EQi’s research.

EQi’s research surveyed more than 2,000 adults and found the following*:
• 35% of everyone surveyed have never reviewed their pensions or retirement plans, equal to 18 million people
• 35% of pension holders surveyed don’t know how much they have in their pension pots, equal to 12 million people in the UK
• 42% of pension holders surveyed don’t how much they are paying in fees on their pensions, equal to 14.8 million in the UK
• A total of 29% of people surveyed are either fairly confident (16%) or very confident (13%) they will not be able to save enough for their retirement, equal to 11.1 million people in the UK
• Only 4% of pension holders surveyed review or switch their pensions at least once a year, equal to 1.4 million people
• By comparison, those surveyed who said they had the following products, review them annually:
o 73% review their car insurance annually, equal to 24.4 million people
o 61% review their home insurance yearly, equal to 19.3 million people
o 52% review their energy contracts each year, equal to 17.5 million people
o 17% review their savings accounts annually, equal to 5.7 million people
o 10% of mortgage holders review their home loans annually, equal to 1.4 million people

EQi Director Richard Pearson says these figures are extremely concerning, given how much the benefits of an annual pension review outweigh those associated with other financial products.

Pearson says: “Our research has uncovered a massive knowledge gap amongst millions of people who seem completely disconnected from their retirement savings. While the introduction of auto enrolment got more people saving into a pension than ever before, it has also compounded issues surrounding awareness. A huge proportion of workers now don’t know how much they’ve saved and whether it will be sufficient to support them later on in life.

“With so many people switching jobs throughout their career, which could be 50 years long, the risk is that they end up with a trail of legacy pension pots scattered across different providers, with no single view of how they are performing and how much they are paying in fees. It’s ironic that in a country where consumers are urged to review their insurance policies, home energy bills and savings accounts on an annual basis to save tens of pounds, they could be losing hundreds, or even thousands of pounds on fees and poorly performing pensions, arguably the most important financial product they will ever own.”

It seems that out of sight out of mind is the approach many employees take towards their pension, probably because the onus is on their employers to set it up and manage it on their behalf. EQi’s research found that just 14% of employees said they knew exactly how much was saved across all of their pension pots. However, this rose to 24% amongst self-employed workers, who clearly take more of an interest in both their retirement plans and how much they are putting in their pensions.

One of the most popular options for the self-employed to manage their retirement, particularly if they are combining pension pots from previous employers, is to set up a Self-Invested Pension Plan (SIPP). While SIPPs can be used by anybody looking to combine previous pensions, EQi’s research uncovered yet another knowledge gap around awareness and use of SIPPs.

The study found:
• 14% of those surveyed are unaware of SIPPs, equal to 7.3 million people
• 12% say they don’t know how much a SIPP would cost, equal to 6.4 million people
• 12% of people questioned don’t understand the rules around moving pensions pots, equal to 6.1 million people in the UK
• Meanwhile 11% of those surveyed think SIPPs are too complicated and worry they might make a mistake trying to open one, equal to 5.4 million people

To address this, EQi is to launch a series of webinars to help savers understand the benefits of SIPPs, such as being able to see all their pension savings in one place, having more control over where their money is invested and streamlining the fees pension holders pay. But the webinars will also cover the dos and don’ts of SIPPs, as they aren’t suitable for everyone, including those in a final salary or defined benefit pension.

* A nationally representative survey of 2,062 adults carried out by YouGov between in July.
[1] Office for National Statistics Wealth and Assets Survey
[2] Department of Work and Pensions https://www.gov.uk/government/news/thousands-more-make-contact-with-long-lost-funds