While 53% of Brits claim to be knowledgeable about pensions, just 35% and 34% can correctly identify a defined benefit (DB) or defined contribution (DC) scheme respectively, according to research by insurer Aviva.
Its survey of more than 2,000 UK adults revealed that 76% of respondents aged 25–34 years said they were sure they knew what they needed to about pensions. However, just over two-fifths (44%) of this age group correctly identified the characteristics of a DB pension, and only 45% knew the features of a DC scheme.
While 64% of male and 43% of female respondents said they were knowledgeable about pensions, 47% of men and 45% of women correctly described what a workplace pension is. One-fifth (20%) admitted they were unsure of what type of pension they currently have and 16% did not know what a workplace pension is.
Just over a third (34%) correctly identified that there is no longer a default UK retirement age, and 20% knew that individuals with a DC pension can access it from the age of 55. Just over under a fifth (17%) correctly stated that people currently start receiving their state pension from the age of 66.
More than half (57%) did not know that the government contributes to pensions in the form of tax relief and just 7% knew that the minimum level starts at 20%. While 25% increased their contributions, 18% of those who have not changed their levels were unaware they could.
While a fifth (19%) actively manage their pension investments, 55% do not know how it is invested. The majority (81%) have never changed their investment strategy, and a quarter said this is because they do not know enough, or did not realise they could.
While 69% of respondents have between one and five UK pension pots, 20% are unaware how many they have. Of those who do know where their pensions are, 35% do not know how to access these. Only 15% have consolidated their pensions, while 46% of those interested are unsure how to proceed.
Doug Brown, chief executive officer of insurance, wealth and retirement at Aviva, said: “These findings clearly show that, while confidence is high, people’s knowledge and understanding of pensions doesn’t necessarily match that self-assurance. By empowering people with better pension knowledge and the tools they need, we aim to help them make informed decisions about their financial futures to help them get ready for retirement.
“A good grasp of pension literacy can help to maximise benefits by knowing when and how to claim pensions, understand tax implications, and make the most of employer contributions. Having a well-informed approach to retirement planning, including how to balance spending, saving and investing, means people could have sufficient savings put aside to maintain their desired lifestyle in retirement.”
