Despite the relative success of the pension auto-enrolment rollout and the increase of minimum contributions from 5% to 8%, there’s still a culture of misunderstanding surrounding them.
Experts generally recommend contributing a figure of around 13% towards your pension, but many people still think that by making the minimum contribution they are conforming to the recommended rate of saving. This simply isn’t the case.
In all this confusion, it’s time for something to change. In February this year, Portafina Investment Management conducted research with over 2,000 people aged 18 to 70 to test their pensions knowledge.
Their survey found that less than 1 in 5 (19%) didn’t understand pensions. 72% didn’t know when they would be able to withdraw money from a private pension, and 31% had no idea when their pension would be taxed (and a further 40% thinking they knew but were wrong).
So why are people getting it so wrong?
One barrier might be the technical language used to describe pensions. In fact, 85% of those surveyed in the report said that they received clearer information about their pension when it was in plain language. They also preferred coherent graphics which helped them to make more informed decisions.
Although it has been compulsory for secondary schools to teach financial education since changes were made to the national curriculum in 2014, academies and free schools are not bound by the official curriculum. Government figures suggest around 40% of schools are not delivering this education to students. This means many young people are missing out on learning vital knowledge around income and expenditure, credit and debt, insurance, savings and financial products and services, all of which would benefit them in later life.
How can you plan for retirement?
Planning and saving for retirement is becoming one of the biggest challenges of modern life, with life expectancy increasing and state pension provisions dwindling. It is becoming apparent that most of us will require a significant nest egg in order to live comfortably in retirement.
Even those with pensions often do not really understand the mechanics and they certainly don't realise just how much it can be costing to have their pension managed each year. Let us help by demystifying pensions and setting you on the right path. Contact us today on 01246 560 570.