The financial services sector has a habit of assuming that people have a greater understanding of their money and savings than they actually do.
Case in point, research from financial communications agency Teamspirit found that many young savers, especially those aged 18 to 34, do not know how pensions work.
Bearing in mind that it is during these early working years when the success of a retirement pot can be made or broken.
Among those polled, 27% believe their retirement pots are set aside and left untouched until the day they stop working, while 24% are not aware of where their pensions are invested.
Just 34% know that their retirement funds are invested in the stock market and other assets.
Greater information needed
The agency warns that its findings prove a lack of pension awareness; as well as a danger of people not taking any action with their finances in times of economic volatility, such as the covid-19 pandemic.
In fact, Teamspirit discovered nearly three quarters (74%) of pension holders aged 18 to 34 made no changes whatsoever to their pots in the wake of the pandemic.
A quarter (24%) did not know how to make changes to their pension and 15% were not even aware that they could.
People aged 35 to 54 were, understandably, most worried about their pensions as they are in the window where they are supposed to contribute more significant sums to their retirement funds.
The nationally representative research was undertaken by Opinum on behalf of the communications agency, which surveyed 2,000 people based in the UK in September 2020.
Change communication tactics
Adam Smith, managing director at Teamspirit, said: “The fact that so few people understand what their pension gets up to – in other words that it is invested in the stock market – points to a huge, gaping knowledge gap.
“This needs attention. How can we expect people to check, monitor and engage with their pensions when so many don’t even know it can be checked and monitored?
“Unfortunately, this low awareness is widespread across all age groups which means that we need to adopt more creative communication tactics to grab the attention of different audiences.
“A letter or email that lands in a pension holders inbox is only part of the solution. Communication, and even general pension education, needs to be promoted on various channels. This means more content on social channels, more video, more games, more animation, more influencers.
“And dare I say it, it needs to be more entertaining. Yes, pensions are interesting.
“Think about your mobile phone – the average person’s thumb travels more than five miles a year scrolling through online content.
“Pension content needs to be thumb stopping content. Only then can we help people understand what their pensions is and how is can help them in the future. Then we can start to transform financial services for the better,” he added.
