Research published in August from several companies suggests that not only are many people underprepared for retirement, but that they are often ignorant of how their investment is performing.
The number of people enrolled in a company pension scheme currently stands at 8.2million, a figure at its lowest since 1953.
A third of people surveyed by Barings said they have no pension at all.
Research by Scottish Widows showed that in order to meet expectations of an average retirement income of £25,200, a 30-year-old contributing to a pension for the first time would need to pay in £1,000 per month until retirement – meaning saving from an earlier age is almost essential.
Although anxiety around retirement is high (a third of people in their twenties are concerned about the potential impact of care costs in later life, according to Scottish Widows figures), there is widespread failure to plan. Only 4 per cent consider saving for a pension as a financial priority, even though reducing the age at first contribution from 30 to 20 can increase retirement income by 39 per cent.
A lack of knowledge and understanding around pensions is a serious problem. Although more than a quarter of the younger generation surveyed by Scottish Widows considered themselves to be fully aware of all their options, less than 19 per cent of those in their twenties said they knew what an annuity was.
In research by Axa Life Invest, it became apparent that 42 per cent of people with a pension had not checked its performance in the past year, but even worse, 40 per cent have never checked the performance at all.
Specialist insurer Partnership found that 76 per cent of people approaching retirement believed that staying with their current pension provider would “make no difference” to the amount their annuity pays.
According to Partnership’s figures, a mere 50 per cent of respondents to the survey of people aged between 45 and 65 realised that retiring later would result in higher annuity income. Eight per cent even believed that retiring later would mean you receive less from your pension pot.
Lisa Conway-Hughes, a chartered IFA at Westminster Wealth Management, said her experience echoes the findings of the research. She said the solution is simple but painful, and that is to advise clients to “work longer, start to save earlier, save more or cut your expectations”.
The onus is on the public to take their financial future seriously, she says, and “get good quality, regular financial advice to ensure they are not paying too much in fees and that their investments are working hard for them”.