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Over one in five people don’t know that pensions are invested in the stock market
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Over a quarter are unaware of how much the state pension is
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Over a quarter of under 34s think the state pension is worth over £10,000 a year
Although pensions have been in the spotlight since new freedoms were introduced in April, there are knowledge gaps that still need to be addressed. To gauge insight into broader understanding of pensions and savings, along with the UK’s thoughts on future income, The Share Centre conducted research of over 1,500 19-87 year olds.
Many of those surveyed were confused about how much they will receive from their state pension, with one in four (28%) admitting they didn’t know how much it is. However, some are in for an even bigger shock, as one fifth (20%) assumed that it is over £10,000 a year. The younger generation are the most naive when it comes to expectations, with 27% of under 34s over-estimating the state pension by a staggering £4,000 a year.
On the other hand, despite moves in the Autumn Statement to increase the State Pension, over half of those surveyed (57%) don’t even think it will still exist when they reach retirement. This highlights the need to look for alternative ways to boost income and make additional provision for a secure financial future. The realisation that the state pension may not be all that had been hoped also emphasises the need for common sense when releasing pension pots under the new pension freedoms. Investors are generally sensible and hence at The Share Centre we have seen an increase in the level of ISA contributions by the over 55s since the pension freedoms came into force.
Richard Stone, Chief Executive of The Share Centre, commented:
“It appears that not only are people in the dark when it comes to the workings of their pension, but when it comes to a state pension, many are massively over estimating this government funded safety net. A staggering one in five people are over estimating their state pension by £4,000 a year. That over estimate is likely encouraging a lack of urgency in younger people to start setting money aside for their future. Although those starting out in work are often challenged by other financial demands such as student debt, housing costs or starting families, just putting a small amount aside on a regular basis can help build a meaningful savings pot for retirement.
“As the new pension freedoms came into force earlier this year we do not believe investors are generally being rash and spending those savings irresponsibly. Indeed we have seen alternative savings products like equity ISAs becoming more popular. Since pensions freedom we have seen equity ISA inflow increase by 13% year on year and we expect to see more people shift focus from pensions to equity ISA in the future. This will enable them to drive further investment growth and income from those savings tax free and boost their state pension or other income which may not be delivering as much support as they had hoped.”
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