Organisations are failing to communicate pensions effectively to staff as one-in-four employees claim not to know what type of pension scheme they belong to. This is according to a JP Morgan report Working in the dark which also revealed that many employees in defined contribution schemes (DC) are unaware of how much they need to save in order to obtain an annual pension of £15,000 upon reaching retirement.
Just under a third (32%) claimed not to know about the link between the size of a money purchase pension fund at retirement and how it would convert into an annual income. At current annuity rates, a pension fund of at least £250,000 is required to fund an annual income of £15,000.
Just 20% of respondents answered the pension fund figure correctly, but 14% believed that £50,000 would be sufficient to provide an annual income of £15,000. The report concluded that more pensions education would ensure that employees are able to make the most of the employer’s scheme.
Three-quarters of those who belong to a DC scheme, for example, claim to review their investments at least every three years. But if they do not know how much they require to obtain their desired retirement income, they could unknowingly be underfunding their scheme.
Some 20%, meanwhile, have never reviewed their pension planning. In a DC scheme, the onus is on employees to ensure that their pension is sufficiently funded so this group would have little idea what return their fund will provide in retirement.
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