Just under two thirds (64%) of non-retired people – the equivalent of 23 million people – admit to not reviewing their pension plans at all over the past four years, according to the latest annual consumer research by Baring Asset Management.
Despite the significant changes to global financial markets over the time period, a similar number (61%) admit to not reviewing their long-term savings and investments, including two-fifths (43%) who said they had ‘never’ reviewed their retirement plans. Only one in five (22%) said they had reviewed their investments over the past 12 months.
In the 55-64 year old market segment, the survey found that just over half (53%) had reviewed their retirement plans over the past four years – despite approaching the traditional age for retirement. A similar number (52%) said they had specifically reviewed their pensions, leaving large numbers of people with potentially the wrong asset allocation and risk profile.
Just 18% of respondents in the 54-65 age range said they were ‘very’ aware of the level of risk involved in their investment portfolio, including their pensions, with a further 38% ‘fairly’ aware. Overall, less than half (46%) of people said they were either very or fairly aware of the level of risk involved in their investments – up from last year’s survey (43%).
Rod Aldridge, Head of UK Wholesale Distribution at Barings, said: “It is absolutely vital to fully understand the asset allocation and risk profile of your retirement funds and pensions, otherwise the risk is that you could suffer from a misallocation of assets and be inappropriately invested. This is particularly relevant for people leading up to the traditional retirement age.”
The research also found that two-fifths (41%) of non-retired people – the equivalent of 8.2 million people – opted for the default option when they reviewed their pension plans. The number of people selecting the default options is the highest since the Barings survey began – it was 36% in 2009, for example – but only half (49%) described the explanation as either ‘very’ or ‘fairly’ good. A fifth of people (21%) said it was not explained at all or they can’t remember.
Barings’ research also canvassed investor sentiment with regards to multi-asset funds – a single fund that invests across all major asset classes with responsibility for asset allocation with a professional manager. This year’s survey found increased positive sentiment towards multi-asset strategies, with the average percentage of a pension that people would consider investing in a multi-asset fund rising from 12% in 2011 to 13% in last year’s survey and 18% this year.
Rod Aldridge said: “We believe a multi-asset fund can form part of a risk-adjusted savings and pensions portfolio, though it is important to seek independent advice on what should be the correct assets to build and protect retirement funds. It is also vital to regularly check that you have the right asset mix to match your risk profile, particularly if there are changes to your life that could alter your appetite for risk. Our research indicates that too many people are forgetting or ignoring their retirement plans, which is concerning.”
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