Pensions - Articles - PLSA offers five key facts on pensions savings

 In the study, only 53% knew that retirees receive around £9,000 per year from their state pension with those aged 55 and over being more likely to identify correctly how much retirees receive (70%), compared to only 40% of those aged 18-34.

 The survey also showed that over half of non-retirees with a pension are worried that they are not saving enough for their retirement (56%), with only one in five (21%) confident that the amount they are saving in a pension is enough to let them live the lifestyle they want when they stop working.

 In fact, three-quarters (75%) of non-retirees say they believe they could save extra into their pension to boost their pension savings, with the average additional contribution being £68 per month. One in six (17%) say they could only pay in less than £25, just over a quarter (26%) say they could pay in £25 to £50 in additional contributions, while a further quarter (25%) say they could pay in between £51 and £200 in additional contributions. Seven per cent say they could pay in more than £201 per month in additional contributions.

 The survey forms part of activity by the PLSA for Pensions Awareness Week (Monday 13 September – Friday 17 September 2021) to help savers better understand their pensions and dispel some of the myths about retirement saving.

 From the survey data, five key areas have been identified where savers’ pension knowledge needs demystifying.

 But our research finds that the majority of the public do not know (78%) how much new retirees with a full state pension will receive.

 As could be expected, older people and those who are retired tend to have the highest awareness, with almost half (46%) of those aged 65+ and two in five retirees (43%) saying they are aware how much retirees will receive from a full state pension. However, even among these groups many are unaware of the amount that retirees receive (54% of those 65+ and 57% of those who say they are retired).

 When asked if savers plan to rely on the State Pension come retirement, just over a third (36%) said that they expect to rely on it as their main source of income, especially those between 55 and 64 (49%). However, one in five said that they remain unsure what they will rely on in retirement (18%).

 Furthermore, younger people (those aged between 18-34) and those with other types of pension are less likely to say they will rely on the state pension as their main source of income (26% and 31% respectively).

 There are two types of workplace pension: those based on the contributions made plus returns from investing the fund (defined contribution pensions) and those linked to your salary (defined benefit pensions). If you are not automatically enrolled into a workplace pension, you can either ask to join it or save into one some other way.

 However, while Automatic Enrolment has been a success, a quarter of those surveyed stated that they still do not have a pension (25%), while five per cent don’t know if they have a pension or not. Concerningly, one in five non-retirees say they are currently not paying into any pension (20%).

 Based on in-depth research with the British public, the PLSA produced its Retirement Living Standards to help savers picture their future life in retirement at three different levels of expenditure: Minimum, Moderate and Comfortable.

 Roughly speaking, a single person will need about £10k a year to achieve the minimum living standard, £20k a year for moderate, and £30k a year for comfortable. Like 5-a-day, this can be briefly summarised as 10k-20k-30k. For couples, it's 15k-30k-45k. These expenditure levels do not include mortgage or rent payments as most retirees do not have to pay them.

 Two in five (42%) non-retirees believe they will be able to achieve a minimum lifestyle according to the PLSA’s Retirement Living Standards, while more than a quarter (28%) believe they will be able to achieve a moderate lifestyle. Just one in six (16%) believe they will able to achieve a comfortable lifestyle.

 The survey found that people from older age groups are more likely to believe they will achieve a basic or moderate lifestyle than the younger age groups (71% of 65+ year olds believe a minimum level is achievable, 40% believe a moderate lifestyle is achievable, while one in seven (14%) believe a comfortable level is achievable). In contrast, only 40% of 18-34 year olds believe a minimum level is achievable and a third - 32% think a moderate level is achievable, while a quarter 23% believe a comfortable level is achievable).

 However, a quarter of 18-34 year olds are unable to say whether any level is achievable.

 Savers who have a defined benefit pension, can choose to take their whole pension as a regular income (sometimes with a cash lump sum), often upgraded in-line with inflation, or after taking financial advice – for pots over £30k – they can choose to transfer their pension to a defined contribution pension.

 The news that a choice was required came as a shock to a number of those surveyed with a third of non-retirees (32%) saying they did not know they will have to make a choice from a range of different options as to how they want to take their money at retirement.

 Furthermore, just over a quarter say they know they need to choose and fully understand their options (29%), while two in five say they know they need to choose a retirement option at retirement but say they don’t fully understand the options (39%).

 Encouragingly, most non-retirees surveyed said they would get advice when it comes to making their pension income decisions (93%), with half saying they will go to Pension Wise (50%).

 A third say they will go to a financial adviser (33%), while a quarter will go to another government/consumer website (27%), a pension scheme (26%) or a private sector money advice website, for example, www.moneysaving expert.com or Which (24%).

 Finally, almost one in five say they will go to their employer (17%), while a third (31%) say they will get advice from family or a friend.

 Nigel Peaple, Director Policy & Advocacy, PLSA, said: “It is striking that so many people do not yet know the basic elements of pension saving, such as how much the State Pension is worth, how much they need to save, and the choices they must make about how to draw their pension at retirement.

 “This Pensions Awareness Week, we want savers up and down the UK to take stock of their pension saving and to check that they are saving the right amount to achieve the retirement lifestyle they want. It’s encouraging that three quarters of respondents believe they can afford to save more into their workplace pension. People often do not know how to make extra contributions. Your pension scheme or provider can help with this.

 “It’s never too late to start thinking about your pension. Using the wide variety of tools available – including the PLSA’s Retirement Living Standards and MoneyHelper’s Pension Calculator – savers can gain a better understanding of what types of lifestyles they can afford to live in retirement given their current saving habits.”

 A total of 2,075 people took part in the nationally representative survey, carried out by Yonder Consulting. The survey took place between 25 August to 26 August 2021.