A recent survey conducted by Aviva has revealed a significant gap between perceived and actual knowledge about pensions in the UK. Despite 53% of Brits claiming to be knowledgeable about pensions, only a third can correctly identify a Defined Benefit (DB) or Defined Contribution (DC) scheme. Furthermore, 20% of respondents don’t know what type of pension they have, and 57% are unaware that the government contributes to pensions in the form of tax relief.
The survey of over 2,000 UK adults found that confidence in pension knowledge varies by age and gender. Men (64%) are more likely to claim they know what they need to know about pensions, compared to women (43%). However, when it comes to accuracy, men and women are more evenly matched, with 47% of men and 45% of women correctly describing what a workplace pension is.
The research highlights five key areas where people’s understanding of pensions is lacking:
- Understanding the basics: Many people don’t know the difference between DB, DC, and workplace pensions, with 16% unsure what a workplace pension is and 20% unsure of their own pension type.
- Access to pensions: Only 34% of respondents knew that there is no longer a default retirement age in the UK, and 20% knew that individuals with a DC pension can access their pension from age 55.
- Tax relief: Over half (57%) of respondents didn’t know that the government contributes to pensions in the form of tax relief, and only 7% knew that the minimum level of tax relief starts at 20%.
- Investment strategies: More than half (55%) of respondents didn’t know how their pension is invested, and 81% have never changed their investment strategy.
- Consolidating pensions: Over two-thirds (69%) of people have between one and five pension pots, but 35% don’t know how to access them, and only 15% have consolidated their pensions.
The survey’s findings emphasize the need for greater financial literacy and support to help people prepare for a secure retirement. Aviva’s CEO, Doug Brown, comments that “financial literacy is the cornerstone of financial wellbeing” and that empowering people with better pension knowledge and tools can help them make informed decisions about their financial futures.
To address the knowledge gap, Aviva and other organizations offer resources and tools, such as pension calculators, to help individuals improve their understanding of pensions and plan for retirement. The Money Advice Service also provides free and impartial advice on pensions and retirement planning. By educating themselves and seeking help, individuals can make the most of their pension benefits and achieve a more secure financial future.