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Savers in the dark over pension basics

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30/11/2015
A fifth of UK savers have no idea their pension is invested in the stock market, according to a report highlighting worrying knowledge gaps around retirement planning.  

Although pensions have been in the spotlight since new freedoms were introduced in April, a study from The Share Centre revealed consumers are particularly confused about the state pension.

A poll of 1,500 British adults revealed that 28% did not know how much state pension they would receive and 20% wrongly assumed they would get over £10,000 a year.

Under the current state pension rules, retirees in fact receive nearer to £6,000 a year.

The younger generation was the most naive when it came to expectations, with 27% of under 34s over-estimating the state pension by a staggering £4,000 a year.

Despite moves in the Autumn Statement to increase the state pension from April 2016, over half of those surveyed (57%) didn’t think it would exist when they reach retirement.

Richard Stone, chief executive of The Share Centre, said: “It appears that not only are people in the dark when it comes to the workings of their pension, but when it comes to a state pension, many are massively over estimating this government funded safety net.  A staggering one in five people are over estimating their state pension by £4,000 a year. That over estimate is likely encouraging a lack of urgency in younger people to start setting money aside for their future.

“Although those starting out in work are often challenged by other financial demands such as student debt, housing costs or starting families, just putting a small amount aside on a regular basis can help build a meaningful savings pot for retirement.”

Pension freedom? Never heard of it

A separate survey revealed millions of older savers still haven’t heard about the new pension freedoms.

Saga Investment Services found that almost one in five over 50s – equivalent to 3.4 million people – are still completely unaware of their new powers to draw as much as they like from their pension from the age of 55.

Despite countless headlines, multi-million pound government advertising campaigns and almost £5bn withdrawn from pensions since April, a third are still confused by the pension reforms – yet just 6% have sought out professional financial advice to help them manage their pension in retirement, according to the research.

Nici Audhlam-Gardiner, managing director of Saga Investment Services said: “It’s extremely concerning to find that so many over 50s simply don’t know about this huge change to the way they can access their savings, or remain baffled by the reforms. With people spending longer in retirement and living longer overall, their money is going to need to stretch further than they might expect. Our findings suggest that today’s over 50s could be putting their savings in jeopardy without assistance.”

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