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Quarter of younger people think pensions are held in bank account

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A quarter of 18-24-year-olds with a workplace pension wrongly think that their pension contributions end up in a bank account.

This is according to Royal London research which showed that only 28% of young adults know that their pension contributions are invested by their pension provider.

Over a fifth (22%) do not know what happens to their pension contribution, with 30% of women saying this compared to 15% of men.

Additionally, 15% incorrectly said their workplace pension is invested in funds either they have picked or have been selected by their financial adviser.

Half of people with a workplace pension were unsure if they were saving enough to have the means to live comfortably in their retirement and 37% said they should be saving more.

Also, 22% said they do not know if they are saving enough.

Again, there was a gender split with 47% of men saying they are saving enough for retirement with 34% of women saying the same.

Pension engagement varied with 24% saying they check theirs once a month and 21% said they never check their pension.

Royal London consumer finance specialist Sarah Pennells said: “It’s heartening to see the majority of people know that their pension funds are invested but it was a surprise to see that a quarter of young adults thought that the money that left their pay packets every month ended up in a bank account until they needed it.

“There is definitely more to do to get people actively engaged with their pensions and taking an interest in where that is being invested.

“Retirement can seem like a long way away, until suddenly it’s around the corner. There are lots of demands on people’s time and money, but if you ignore your pension and don’t think about what you’d need for a good standard of living when you stop work, your retirement may look very different to the lifestyle you’d like.”

Royal London pensions expert Clare Moffat added: “Auto enrolment has been a great success in getting more and more people saving for retirement but, for most, the amount being saved won’t give them the retirement they want.

“The earlier that someone starts saving into a pension the better and that’s largely due to employer pension contributions, the government top up in the form of tax relief and then the benefits of compound interest. But it is difficult for people to see the benefits of pensions if they don’t understand them.

“This is especially important at key points in people’s lives like entering the workforce or changing jobs. However, having a child and stopping or working part-time due to caring responsibilities or health issues are also key points. These are more likely to affect women and this is one of the reasons that two thirds of women feel like they aren’t financially prepared for retirement compared to just over a half of men.”

Royal London obtained these results by commissioning Opinium to survey 6,000 UK adults, 4,500 of which had one or more workplace pension.

These results came during Pension Awareness Week which started on 11 September 2023 and ends on the 15.

Source: Darius McQuaid – www.moneymarketing.co.uk

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