2 in 3 people don’t know their pension is invested: are you one of them?

The chances are that you have some sort of pension. But are you part of the majority who don’t realise that they are investing in assets with their pension contributions?

I’m going to explain and debunk some retirement savings myths. This way, you’ll have a better understanding of what’s going on with your funds.


Do people understand their pension investments?

According to research from Hargreaves Lansdown, there’s a worrying lack of understanding around pensions in the UK.

In the company’s survey, only 35% said their pension was going into market investments. Another 33% didn’t believe their retirement savings were being held in investments. And the remaining 32% didn’t have a clue either way!

The stats are even worse for women, with only 25% realising the relationship between pensions and the stock market.

Do older people have a better grasp on their pension?

If you’re far from retirement, you can be forgiven for not knowing the complete ins and outs of your pension.

But by this logic, you’d assume that those who are closer to retirement have a better understanding of their pensions, right? Nope!

Unlike a fine wine, it seems pension awareness doesn’t improve with age. Only 33% of 45-54 year-olds know that their money is funnelling into the markets.

What does this tell us about UK pensions?

Well, the glaring point is that most people don’t get how their pensions actually work. You may not be a personal finance nerd, so it’s okay if you only know the basics.

But choosing not to engage or completely misinterpreting your pension could really hamper your retirement prospects.


How can you better understand your retirement savings and investments?

Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, explains some of the savings confusion: “Around one-third of people know their pensions are invested in the stock market. It’s an alarming figure, but it’s understandable because we talk about saving, rather than investing, in a pension.

“It means people are confused into thinking their contributions are stored in some kind of bank account until retirement. This fundamental misunderstanding stops people from engaging with their pension planning.

“By being invested in the stock market, they can benefit from long-term returns that really boost their retirement savings. Knowing the impact these returns can have should encourage people to contribute more.”

How can you learn more about pension investments and how the stock market works?

We have plenty of personal finance resources that can help you better understand the world of investing. For starters, you can check out this guide on basic investing principles. What’s great is that you can use this knowledge to improve your pension prospects, even if you don’t do any other investing.

If you learn how the markets work, you can even alter your arrangements. This might make sure that your retirement savings have the best chance of growing. Have a play around with our investment calculator to see how just a small increase in your return percentage could set you up for a much wealthier retirement in the future.

Armed with more knowledge, you may even choose to invest your pension pot in more sustainable investments or funds. Whatever you decide to do, the main takeaway here is to make sure you don’t sleepwalk through the lifetime of your pension. Your retirement could suffer if you do.

The post 2 in 3 people don’t know their pension is invested: are you one of them? appeared first on The Motley Fool UK.

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