Page 44 - DIY Investor Magazine - Issue 26

THE PENSIONS KNOWLEDGE GAP THAT COULD HARM YOUR RETIREMENT PLANS
How much do you have in your pension? Do you even know where all your pensions are? And most importantly of all, are you certain you’ll have enough to live on when you retire? By Mouthy Money.
These were some of the questions EQi asked when it surveyed over 2,000 people about their retirement plans and their understanding of pensions. The results were surprising and quite worrying!
More than a third of the people EQi spoke to (35%) said they had never reviewed their pensions or retirement plans. The survey was a nationally representative sample of people undertaken for EQi by the Centre for Economic and Business Research (Cebr), so when you extrapolate that percentage out to the whole of the UK, that is equal to 18 million who have no idea how much they will have to live on when they retire.
‘MORE THAN A THIRD OF THE PEOPLE EQI SPOKE TO (35%) SAID THEY HAD NEVER REVIEWED THEIR PENSIONS OR RETIREMENT PLANS’
The good news is that more people are saving for their retirement than ever before, primarily because of the introduction of workplace pensions that mean that most workers will be automatically enrolled into a plan by their employer.
According to the government, the total value held in British pensions rose from £2.9 trillion to £6.1 trillion over the last decade; that’s more wealth than in savings and investments combined, physical assets like art and antiques, and even more than the value of property privately owned in the UK, which totals just over £5 trillion.
But it seems the increase in the number of pension holders brought about by the introduction of auto enrolment has not resulted in people taking more of an interest in what’s in their pension pots or indeed their retirement plans.
EQi’s research found that, of the people surveyed who said they had a pension, over a third (35%) did not know how much they actually had in their pension pots; that’s equal to about 12 million people in the UK. It’s no surprise then that EQi found that a total of 29% of people surveyed, which is equal to 11.1 million people in the UK, were either fairly confident (16%)
or very confident (13%) that they would not be able to save enough money for their retirement.
This picture is exacerbated by the fact there is no longer such a thing as a career for life and most final salary pensions schemes have vanished as well.
It is estimated that British workers will have 11 different jobs in their career on average, which could be more than 50 years long if you’re just starting out at work. Each of those jobs is likely to come with a workplace pension, so many people will accumulate a string of legacy pensions that they no longer contribute to.
They are also unlikely to be reviewing them on a regular basis, as EQi’s research shows, to see how their investments are performing, or how much they’re paying in fees. And because these fees are replicated over several different pensions and providers, probably all changing a different amount, the costs of having multiple pension pots could really mount up.
‘THE COSTS OF HAVING MULTIPLE PENSION POTS COULD REALLY MOUNT UP’
In fact when EQi asked pension holders about the fees they were paying, more than two out of five (42%) said they don’t know how much they were paying in pension fees, which is equal to around 14.8 million people in the UK. Only 4% of pension holders surveyed said they review or switch their pensions at least once a year, which is around 1.4 million people. By comparison, EQi’s research found that people are 17 times more likely to review car insurance costs annually than their pensions.
EQI FOUND THAT:
• 73% of car insurance customers, around 24.4 million people, review their car insurance costs annually
• 61% of home policy holders, or 19.3 million people in the UK, review their home insurance yearly
• More than half (52%) of people surveyed said they review their energy contracts each year, equal to 17.5 million people
• 17% of savers review their interest rates annually, which is equal to around 5.7 million people
And one in ten (10%) of the mortgage customers EQi spoke to review their home loans every year, which is equal to around 1.4 million people in the UK. Of course, reviewing your financial products on a regularly basis makes absolute sense and many of us have become used to checking the cost of our insurance
DIY Investor Magazine | Dec 2020 44