A pension is often the biggest asset that a person will have in their lifetime. Yet new research reveals that swathes of people in schemes from some of the UK’s best-known life companies lack key information to help them plan for their future.
The ‘Show Me My Money’ report from interactive investor, the UK’s second largest DIY investment platform, calls on the industry, policymakers and regulators to adopt an approach of “meaningful transparency” in pensions communications.
CEO of interactive investor Richard Wilson said: “In any other industry it would be unthinkable for customers to be given so little idea about what they are buying, and how much it costs. And yet thousands of people are taking their retirement journey in the dark – and that means an uncertain retirement destination.”
Charges and transparency
The report uncovers frustration amongst consumers that information about their pension such as asset class, sector, geography, sustainability and exit fees is not easy to find.
Nearly half (48 per cent) of 1,000 UK adults polled for the study by Opinium could not guess the amount they pay each year to their pension providers into their pension pots in charges. Further research from a Boring Money consumer panel found that generally, people were aware that they paid some kind of fee but did not know what this fee was.
Boring Money set its panel the challenge of finding information on potential exit fees – and they found it impossible. Information on ethical investing also proved to be elusive, echoing the interactive investor Great British Retirement Survey, which found that over half of respondents had no idea if their pension was being invested ethically.
Becky O’Connor, Head of Pensions and Savings for interactive investor, said: “In any other context it would be considered totally wrong for people not to know what they are paying for something – particularly something that is so valuable and can be so costly.”
How much risk is right?
Nearly a third (32 per cent) of UK adults don’t know or can’t remember whether their pension is invested in funds that automatically become less risky as they get older, according to the report.
It found that younger people are more likely to be aware of this ‘de-risking’, with more than half (54 per cent) of 18 to 34-year olds knowing their pension is invested in funds that follow this pattern, compared to only 23 per cent of those aged 55 and over.
The good news
It report isn’t all bad news. It found that people are engaged enough to know roughly how much money is in their pension and what they pay in, with only 5 per cent of those polled unsure how much they contribute to their pension. The average monthly contribution was £249 (£262 a month for men and £224 a month for women).
Only 15 per cent of respondents didn’t know the risk level of their pension, with over half (52 per cent) of under 65-year olds have a moderate risk pension.