More than one in four employees (28%) with a workplace Defined Contribution (DC) pension scheme say they have ‘no idea’ how much is in their pension pot, while an additional quarter (25%) could only make a rough guess. The research, by Capita Employee Benefits, went on to reveal over half (54%) don’t know how much they should realistically be saving for retirement.
The findings highlight a lack of engagement in pensions, with more than one in five (23%) never checking how their pension is doing.
Pensions communications seem to the issue for a lack of understanding and engagement. More than a third (34%) don’t know where their pension contributions are invested and - of those that don’t know – nearly half (46%) say they had been told, but the information was too confusing for them to take in. Over half of savers (55%) say pensions terminology and jargon are a barrier to them doing more to plan effectively for retirement. And nearly half of those in a DC pension scheme (48%) agree they would be more willing to save into a pension if they understood how they worked.
Louise Harris, head of client communications for Capita Employee Benefits, commented: “Looking at these findings, it’s not surprising that more than one in three people (38%) saving into a DC pension are worried about retirement. They don’t know how much they currently have in their pot, they don’t know how much they’re going to need in their pot and the way pensions are being communicated to them is preventing them from engaging properly. With DC pension schemes the go-to for many employers as they look to auto-enrol their staff, it’s vital that pensions communications are clear so as to encourage engagement and effective planning for retirement, otherwise as contributions increase, so may opt-outs.”
Louise continued: “Communications about pensions is an issue that has recently been thrust into the limelight following the chancellor’s announcement regarding the ‘guidance guarantee.’ But guidance at the point of retirement, while important following the changes set out in the Budget, isn’t enough - you need good quality, clear communication and guidance about pensions throughout an employees’ working life. For instance, if someone has been consistently failing to contribute enough to their pot, then telling them this when they’re about to stop work is a case of too little guidance, too late.
“If we’re to create a nation of savers, it’s absolutely crucial people are engaged in pensions, understanding how much they have and need, so they can adapt their contributions and choose where they invest, while regularly checking to see they are on track. Employers must therefore provide clear, good quality information, in order to empower people to make these kinds of choices.”