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UK savers have pension ‘disconnect’

6 December 2020

Brits face a “massive knowledge gap” when it comes to saving for the future, EQi has warned, after research revealed that millions of people are disconnected from their retirement savings. 

A survey published by the investment platform found that 35% of UK adults have never reviewed their pensions or retirement plans, equating to 18 million people.

Furthermore, 35% of pension holders don’t know how much they have in their pension pots, whilst 42% don’t know how much they’re paying in fees.

EQi warned that fees could “rack up to a significant amount of money” over time, with the average worker taking on 11 jobs over the course of their career.

In contrast, only 4% of pension holders, equal to 1.4 million people, were found to review or switch their pensions at least once a year. The firm said that by comparison, 73% review their car insurance annually, while 61% review their home insurance on a yearly basis and 52% revisit their energy contracts each year.

While the value of pension pots is estimated to be £6.1 trillion, up from £2.9 trillion a decade ago following the introduction of auto-enrolment, nearly a third (29%) of people surveyed admitted they felt confident they would be unable to save enough for their retirement.

EQi said the findings suggest millions of savers face a “pensions timebomb” with no idea if they’ll be able to put enough aside for their later years.

Richard Pearson, director, EQi, said: “Our research has uncovered a massive knowledge gap amongst millions of people who seem completely disconnected from their retirement savings. While the introduction of auto enrolment got more people saving into a pension than ever before, it has also compounded issues surrounding awareness. A huge proportion of workers now don’t know how much they’ve saved and whether it will be sufficient to support them later on in life.

“With so many people switching jobs throughout their career, the risk is that they end up with a trail of legacy pension pots scattered across different providers, with no single view of how they are performing and how much they are paying in fees. It’s ironic that in a country where consumers are urged to review their insurance policies, home energy bills and savings accounts on an annual basis to save tens of pounds, they could be losing hundreds, or even thousands of pounds on fees and poorly performing pensions, arguably the most important financial product they will ever own.”

EQi said there was greater awareness amongst self-employed workers (24%) who knew exactly how much was saved across all their pension pots. However, the study found that knowledge around options was still limited, with 14% of those surveyed unaware of self-invested pension plans (SIPP) and 12% not sure how much a SIPP would cost.

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