Interactive Investor

Half of UK workers unaware they have a pension

8th December 2020 14:05

Laura Miller from interactive investor

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An extraordinary 52% of British workers think they are unprepared for retirement, according to research.

Only half of those saving into a workplace pension realise they are putting money away every month for their retirement, according to research.

Less than half (48%) of full-time workers believe they are saving into a pension, according to a survey by EQ, a financial services business.

This is despite Office for National Statistics (ONS) data showing nearly nine in 10 eligible employees are making contributions under the auto-enrolment scheme.

The findings suggest millions of people across the UK who have been auto-enrolled into workplace pension saving are putting money away for retirement every month – which their employer adds to – without ever knowing.

Duncan Watson, chief executive of EQ’s pension business, said that despite the success of auto-enrolment in getting people saving for retirement, the message to get people engaged with pensions, and saving more, is failing.

“It is evident pension saving is still not on the radar of many people, even if they are actually making contributions to their retirement fund,” he said.

“The focus should shift to encouraging employees to engage with the pension-saving journey, and increase awareness of the importance of increasing their contribution rates and maximising employer contributions.” 

Employees who are unaware that they are saving into a workplace pension could miss out on valuable income in retirement.

If they do not update their contact details with schemes they have participated in, it becomes hard to track down the various pots they have paid into throughout their working life.

This could become a problem for many workers during the Covid-19 recession, especially older ones. More than 340,000 people aged 50 to 64 years are now unemployed. That is an increase of almost 85,000 in the third quarter of the year compared to the three months from April to June, according to the ONS.

“The pandemic looks likely to cause lasting damage to the labour market, leaving many older workers unexpectedly facing a deeply challenging and uncertain future,” said Caroline Abrahams, charity director at Age UK.

A pension dashboard to allow everyone to see digitally where their pots are, and how much is in them, was supposed to be introduced this year. But Covid-19 has become the latest roadblock for the initiative, which has already faced several delays.

EQ’s Watson said the pension dashboard “will be a substantial step forward in saver engagement”, and urged pension schemes not to drag their heels any longer.

“It will require a lot of work and for the sake of consumers schemes should begin as soon as possible to avoid a last-minute dash to the finish line,” he said.

Previous EQ analysis of ONS figures found the amount saved into defined contribution pensions has surged since the introduction of auto-enrolment, increasing from £139 billion in 2012-14 to £291 billion in 2016-18.

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