People simply aren’t saving enough into their pension funds. Despite the relative success of the auto-enrolment rollout and the recent increase of minimum contributions from 5% to 8%, there’s still a culture of misunderstanding surrounding pensions.
A reported 51% believe that the minimum auto-enrolment contributions are in line with the recommended rate of saving. This is unfortunately not the case. With experts generally recommending a figure closer to 13%, something needs to change for people to have a real understanding of their pensions.
Recent research (February 2019) on a sample of over 2,000 people between the ages of 18 and 70, designed to find out how much we know and, more commonly, don’t know about the world of pensions paints a pretty clear picture that something needs to be done. Less than 1 in 5 (19%) know exactly what a pension is, 72% are not aware when they would be able to withdraw money from a private pension and 31% have no idea when their pension would be taxed. Clearly there is an issue to be addressed.
So why is it that we don’t understand? Is it because of all the technical jargon? In fact, 85% of those surveyed in the report said that if they received clearer information about their pension in plain language and direct, coherent graphics, they would be able to make more informed decisions. When confronted with 7 common examples of pension-related terms, only 37% knew what some of them meant, with a quarter not understanding any of them at all. Perhaps this is just a symptom of a larger problem regarding a general lack of financial education.
According to the Government guidance, since the introduction of financial education to the national curriculum in 2014, pupils at key stage 4 should be taught about “income and expenditure, credit and debt, insurance, savings and pensions, financial products and services, and how public money is raised and spent.” Despite this, estimates put the figure of schools actually delivering this education at around 40%, as although it’s compulsory for secondary schools, academies and free schools are not bound by the official curriculum.
It seems that many people are missing out on the benefits and later life income available through proper pensions practice and lack of understanding.
Brunsdon is a jargon-free zone! We are pension specialists and can answer all your questions in easy-to-understand, but professional terms. If you’d like to discuss your personal pension situation or retirement financial planning, please contact a Brunsdon Financial Adviser now.
Please note that this information is for guidance only and does not constitute personal advice. Brunsdon is not responsible for the content of third party websites.
The Financial Conduct Authority does not regulate some aspects of Auto-enrolment.