A combination of a lack of financial education and poor access to pensions information among young employees and women may leave them significantly unprepared for retirement, according to a new survey.
Research published on 5 February by financial services professional body the Chartered Institute for Securities and Investment found that 10 per cent of 18 to 24-year-old employees did not know what a pension was or how it worked, and female employees were less aware of employer pensions than their male counterparts.
The poll, conducted by YouGov in December 2017, surveyed more than 2,000 adults, of whom more than half were in full or part-time work. Almost 80 per cent of female respondents, compared to three-quarters of male respondents, admitted to being unaware of their pension’s value, suggesting that women are more likely to be missing out on actively providing for retirement.
According to the survey, a quarter of those aged 55 and over who work do not understand how a pension works. There was also a gender gap in awareness, as female employees were revealed to be less likely than men to be aware of their pension savings – or take action to improve them.
The survey also revealed a gap in financial understanding and expectations of retirement earnings. Almost half of workers who hoped to retire believed their standard of living would drop in retirement. More than a third of workers, however, felt it would remain the same on retirement, and 39 per cent of 18 to 24-year-olds specifically believed there would be no decrease in living standards when they retired.
Almost a quarter of 18 to 24-year-olds felt living standards would actually increase during retirement, compared to only 8 per cent of the overall respondents.
More than half of employees with a pension were unaware of the amount they paid into it, and around a third said they had never checked their pension status – women were more likely never to have done so, at 43 per cent against 28 per cent for men.
While more than a quarter of male respondents were confident that they would be able to retire when they wished to, as they believed they had saved and planned appropriately, only 10 per cent of females said the same.
Nathan Long, senior pension analyst at Hargreaves Lansdown, told People Management that pensions information should be available to suit employees, particularly because, in his experience, women tended to be less engaged with their pension planning than men.
“Engagement levels soar when [staff] are offered mobile access to check their pension value and an ongoing financial education programme is offered,” he said.
Long added that key avenues for employers to increase employee engagement with saving for retirement were “influencing [staff] to pay more in, and to work longer or improve the investment returns of [their] pension”.
Sarah Luheshi, deputy director of the Pensions Policy Institute, said employers should encourage staff to save for retirement from a younger age: “The earlier employees start saving, the larger the pot at the end. Employers that can afford to should be matching staff pension contributions to encourage further saving.”
More than half of all employees surveyed said they would like to retire in their 60s, whereas 40 per cent said they thought they would actually retire at that point.
A lack of preparation for retirement was revealed by 10 per cent, who did not know how they would fund their retirement, and 4 per cent expressed a wish not to retire at all.
The government announced in December 2017 that by the mid 2020s, employees aged 18 or over would be able to save into a workplace pension, rather than the current age of 22, aiming to bring another 900,000 people into a pension scheme.
The scarcity of employees’ knowledge around pensions and saving for retirement was also highlighted by the CIPD’s Employee Outlook: Focus on employee attitudes to pay and pensions: Winter 2016-17, published in February 2017.
It showed that 36 per cent of employees did not know that they neeedd to have made national insurance contributions for 10 years to receive the minimum state pension.
When it comes to funding retirement, most workers who hope to retire expect to fund this through their workplace pension or state pensions. More than a quarter will rely on their private pension or on bank savings, with the latter option being most popular among under-35s. A tenth of respondents did not know how they would fund their retirement.
However, when asked approximately how much money they paid monthly into these pensions, more than half did not know the amount.