Millions of workers in ‘pensions inertia’

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Of Britain’s 8.8 million active occupational pension scheme members, 30% pay no attention to how their retirement savings are invested and 29% have never reviewed how their chosen pension fund is performing, according to research from pensions provider Prudential.

The study also reveals that 48% of workers aged 25 or over have their money invested in the ‘default’ fund of their company pension scheme.

Prudential has warned that workers who do not regularly review the progress of their pension fund to deliver asset growth, or simply select the default fund offered by their employer without studying any other options available to them or seeking advice, could then risk limiting the value of their pension pot at retirement.

Andy Brown, Director of Investment Funds at Prudential, said:

“It’s worrying that so many people who pay into a company pension scheme appear to be in this state of inertia and aren’t taking an active role in the management of their pension savings.”

“You routinely check your savings, utilities, insurance cover, mobile phone contract and broadband arrangements to make sure you’re getting the best from them, and checking the performance of your pension should be no different.”

According to Prudential, with the stock market turbulence of the past two years, now is the time to review your pension investments to ensure are correctly positioned to take advantage of any market upturn. Yes the survey revealed that only 20% of defined contribution pension scheme members say they took an active role in selecting the funds in which their pension is invested from a range of funds offered by their workplace pension scheme, while a further 37% say they have never taken any other action with their pension fund such as seeking independent financial advice, talking to their employer or making additional voluntary contributions.

In fact, just 13% of defined contribution scheme members surveyed said they had seen an independent financial adviser to discuss fund choice and review pension progress while 17% have either taken a pension contribution holiday or stopped paying in completely.

Mr. Brown added:

“If you’re an employee paying into a pension scheme, you have taken the first important step towards building up a fund to provide you with an income in retirement but you stand a greater chance of maximising its value if you review your fund arrangements regularly.”

“People need to find out who is responsible for managing the pension scheme in their workplace and talk to them about the various options available which may help to maximise growth and minimise risk.”

“If you’ve chosen the ‘default’ option, it should be because it best suits your needs and not because you don’t understand or aren’t interested in finding out what else is available.”