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Research reveals over a quarter of Brits are confused or overwhelmed by pensions

Confused by the jargon used when discussing pensions? And if you are, do you let it put you off from preparing for your future? Recent research we’ve conducted shows that you’re not the only one – but we’re on a mission to change that by making it simple to manage your pensions.
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At Wealthify, we believe that everyone should feel confident and in control when it comes to saving for their future retirement. Getting older is something that none of us can avoid, and after many years of working hard, you deserve a fulfilling retirement spent doing the things you love with your favourite people – whether you imagine yourself sipping sangrias in the sun or settling down in the English countryside.

However, we realise that pensions often come with a lot of jargon, which can be confusing to understand and may even put you off from getting your savings in order. You may miss out on tracking down old pension pots or delay when you start paying into your pension, which could stop you from achieving your dream retirement.

That’s why, for Pensions Awareness Day this year, we wanted to find out more about the impact pensions jargon has on how people feel about their retirement and how they are preparing for theirs. We also wanted to discover which terms caused the most confusion, so we can demystify them once and for all.

What did our research discover?

Our research1, conducted amongst 2,000 UK adults, found that 14 million people are “confused” or “overwhelmed” by pensions. In fact, only 14% of those surveyed said that they feel “organised”, and only 11% felt “in control” of their future retirement fund.

This has had a knock-on effect on how people are preparing for their future retirement. 34% of pension holders admit they have felt worried about making the wrong pension decisions, and a further 32% said they have little confidence planning for their retirement because of the common use of jargon.

In fact, the majority (58%) of UK adults do not feel confident setting up a personal pension. The most common reasons for this are:

  • They don’t know where to start (38%)
  • They’re worried about making the wrong choice (33%)
  • They don’t understand the costs or fees associated with pensions (28%)
  • They don’t understand how pensions work at all (26%)

Sadly, the confidence gap is wider with women, with 70% saying they are not confident when it comes to pensions, compared to just 45% of men. However, when it comes to age, the lack of confidence we see amongst the younger generation only gradually improves as people get older and they inch closer to retirement age.

What terms caused the most confusion (and what do they mean)?

When it comes to the language used when discussing pensions, there are many terms that people don’t fully understand. See below for quick jargon-busters for some of the terms that (according to our research) are causing the most confusion:

Relief at source

The number of respondents who hadn’t heard of this term: 50%

If you’re enrolled in this type of workplace pension scheme, your contributions will be deducted from your salary before tax. This means that you’ll only need to pay tax on the income that’s left.

Income drawdown

The number of respondents who hadn’t heard of this term: 36%

This is a way to let your pension carry on growing while taking money from it when you retire. This means leaving your money invested in a pension while taking a regular income from it.

Lifetime allowance

The number of respondents who hadn’t heard of this term: 36%

The pension lifetime allowance for each person is currently £1,073,1002. You will usually pay tax on your pension if it is worth more. This allowance will apply to every pension you have combined.

SIPP (Self-Invested Personal Pension)

The number of respondents who hadn’t heard of this term: 35%

A SIPP is a personal pension that you set up yourself and have more flexibility over. An employer can’t pay into one for you, but you can transfer your old workplace pensions into it.

Pension consolidation

The number of respondents who hadn’t heard of this term: 34%

This is when you transfer your existing pensions (such as past workplace pensions) into one pension pot. This could reduce your fees and help you keep track of your savings.

How can you get on track for your dream retirement?

One of the biggest issues faced when it comes to preparing for retirement is losing track of old pension pots – such as any that were set-up for you by your employer when you had a previous job. Our research shows that 1 in 4 pension holders (25%) think they might have lost or forgotten about previous pensions because they have not consolidated them. And yet, ‘pension consolidation’ is one of the key pension-related terms that remains unfamiliar to many.

To help people get back on track, we have recently released a new pension calculator so you can get a better idea of how much you could have saved for your retirement based on the age that you wish to stop working and how much you may need to retire comfortably. You can also choose to take into account what you can expect to get from the full State Pension (if you are eligible for it), as well as any workplace or personal pensions you have already.

At Wealthify, we make it simple to consolidate your pensions into one pot. Just provide us with a few details about your pensions, and we’ll do the hard work for you. You can then easily check how much you have saved in your personal account dashboard and choose whether you want to keep contributing to this new pension pot – and you can decide how much you want to pay in and how often you do so too. Despite the scary jargon, it really is as simple as that.

Find out more about our Personal Pensions and Pension Consolidation service. For more details on the research and the wider campaign, please email [email protected].

Please remember the value of your investments can go down as well as up, and you could get back less than invested.

The tax treatment depends on your individual circumstances and may be subject to change in the future.

Wealthify does not offer financial advice. Please seek financial advice if you're unsure about investing.

  1. Research conducted amongst 2,007 UK adults on behalf of Wealthify by Opinium Research from 23rd - 27th July 2021.
  2. https://www.gov.uk/tax-on-your-private-pension/lifetime-allowance
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