Research by Hargreaves Lansdown has laid bare a lack of knowledge around pensions, with a large percentage of pension savers unaware that their pension is invested.
It also revealed stark discrepancies between men and women, the investment platform said.
Around half (51%) of men know their pension is invested, compared to 28% of women. Young men aged 18-24 showed the highest awareness that their pension is invested (60%). For women the highest awareness is among those aged 45-54 (33%).
Hargreaves Lansdown said just 52% of men aged 55-64 and 30% of women know their pension is invested.
Clare Stinton, head of workplace saving analysis at Hargreaves Lansdown, said: “Pensions are often our first investment, but a worrying number of people are completely in the dark about it. Overall, only 40% know their pension is invested, falling to 28% of women. It’s a gap that needs to be addressed both overall and across genders if people are to get the most from their retirement planning.
“Helping people get to grips with these issues has the potential to reshape financial futures.”
Stinton said starting to save early and understanding the power of compounding can do a lot of the hard work for people. For women in particular, turning their attention to their pension investments could bring them one step closer to bridging the gender pension gap, which on average sees them retire with significantly less than men.
Stinton continued: “The work around the advice guidance barrier, which will enable providers to offer more personalised recommendations around products, could have a real impact on boosting knowledge and prompting people to take action. It could be particularly transformative for the retirement fortunes of women.”
Hargreaves Lansdown’s research also highlighted the need to address challenges facing older generations, warning that they risk sleepwalking into having a much lower retirement pot than they otherwise could have had.
While most workplace schemes will offer lifestyle strategies, automatically shifting pension investments into lower-risk assets as retirement nears, with the aim of sheltering the pot from market movement and stabilising its value, Hargreaves Lansdown said this approach won’t suit everyone. For those opting to use drawdown, keeping a portion of their pension in shares could actually help grow their pot, even after they start withdrawing from it.
Stinton added: “Too many people are reaching retirement without a clear plan. Without guidance or advice, it’s a risky time to go it alone. It’s vital that those approaching retirement access all the support they need.
“This could be through guidance services like Pension Wise or going down the financial advice route. Under targeted support, providers will also be able to play a bigger role in helping people make more informed decisions.”
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