More than a quarter (27 per cent) of British adults do not understand the UK pension system, according to new research from Close Brothers Asset Management.
The research, carried out by YouGov, looks to highlight the impact that government changes have on UK consumer’s understanding of their pension options. Following the radical changes brought about by pension freedoms, and the recent changes to the state pension age, more than a quarter (26 per cent) state that they find changes in legislation in the UK pension system confusing. A further 29 per cent admit they find the range of products available confusing, the most popular response.
Just seven per cent of British adults stated that they understood the pension system and feel confident enough to use it to their advantage. Interestingly, women admit to understanding the system less than men, with 30 per cent of female respondents stating that they find the system too complicated, compared to 23 per cent of men.
Furthermore, the findings underscore people’s worrying lack of knowledge about their own pension provision, with two in five (40 per cent) admitting to not knowing the number of pension pots that they currently invest in, and nearly three quarters (73 per cent) admitting to being in the dark about the value of the assets in their pension pot(s).
Despite the high level of confusion, nearly three quarters (72 per cent) of adults have never taken professional advice about their pension. This could leave many without a clear plan to accumulate enough savings for retirement or ensure their pension pots savings last long enough in retirement, and less able to react to recent changes to pensions taxation and the state pension age.
David Newman, head of pensions at Close Brothers Asset Management, says, ‘Widespread confusion brings with it a real threat that people are not saving enough for retirement – or using the products and allowances that will best support their pension saving. Pension freedoms have brought opportunity, but allowing this to be undermined by a lack of education and understanding risks setting the UK on a firm course for a savings crisis.
‘As pension products become more complex, and economic uncertainty grows, it’s incredibly important that people make informed decisions about their pension pot and how they can ensure that their particular requirements of retirement funding can be sufficiently met. A worrying number do not even know how many pension pots they have.
‘It’s too easy to take the path of least resistance when it comes to pension products and this often proves to be a false economy. A good financial adviser will prove their worth in the long-term, cut through the confusion, and provide much needed peace of mind for consumers and their families.’