Unfortunately, people simply are not saving enough into their pension funds. Despite the relative success of the auto-enrolment rollout and the increase of minimum contributions from 5% to 8%, there is still a culture of misunderstanding surrounding pensions. With a reported 51% of the public believing that the minimum 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.
Research was carried out in 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, do not know about the world of pensions. The figures paint a pretty clear picture that something needs to be done. With less than 1 in 5 (19%) knowing exactly what a pension is, 72% not knowing when they would be able to withdraw money from a private pension and 31% having no idea when their pension would be taxed (and a further 40% thinking they knew, but being wrong) clearly there is an issue to be addressed.
So why is it that we do not understand? It might be 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.
It is a shame that so many people are missing out on the benefits, and later life income available through proper pensions practice. If you, like many others, feel that you need the jargon interpreted and your pension information delivered in an understandable and accessible way, please do ask for advice from a professional.
5 April 2019
The views expressed in this blog do not in any way constitute advice and are specific to the date noted. As time passes the facts can change and readers should consult their adviser for up to date advice on any matters covered within the blog. Invest Southwest offers an initial review, which is free of charge, however long it takes. From this we will be able to confirm how we can help and give you an opportunity to decide if you would like us to. Thereafter, we will provide you with detailed recommendations and exact costs. Please note that we promise not to levy any kind of fee unless we can demonstrate a benefit to you.