Do you know how your pension is invested? Busting the pension ‘savings’ myth

New data has revealed that an alarming number of savers do not know that their pension savings are invested in the stock market, with even less people likely to know where it is specifically invested. This could mean people’s retirement savings are put into questionable companies without their knowledge.

Only 35 percent of people asked said their pension was invested in the stock market. Meanwhile, one-third (33 percent) said their pension was not invested, while 32 percent said they didn’t know.

There was also a discrepancy in understanding between men and women, with only a quarter of women (25 percent) saying their pension was invested in the stock market. This compares to 44 percent of men.

It also appears that awareness did not increase as people got older.

Just 35 percent of 25-34-year-olds said their pension was invested in the stock market, while 33 percent of 45-54-year-olds said the same.

READ MORE: State pension claimants eligible for £3,000 boost from DWP – how to claim

“It means people are confused into thinking their contributions are stored in some kind of bank account until retirement.

“This fundamental misunderstanding stops people from engaging with their pension planning.

“By being invested in the stock market, they can benefit from long-term returns that really boost their retirement savings. Knowing the impact these returns can have should encourage people to contribute more.

“They also have the power to decide where their contributions are invested and so can choose to invest in a way that suits their retirement plans, and also in line with their values.

“This could be to invest in a more environmentally sustainable way for instance or to remove certain companies or industries from their investments.

“If we can tackle this fundamental misunderstanding of what a pension is then it could prove to be a powerful catalyst for engagement.”

With many people seemingly unaware of the fact their pension is invested, there could be even greater concern that they are therefore unlikely to know where it is invested.

People’s pensions may be invested in arms firms, tobacco companies or fossil fuel miners without their knowledge.

Britons who are worried that they do not know how and where their pension savings are invested can contact their pension provider to find out.

The Government has been taking steps to try to get people to engage more with their pensions and increase their understanding of them.

For example, the pensions dashboard is set to be introduced in 2023, which will allow Britons to see the overall value of all their private pensions, as well as their state pension entitlement.

The Department for Work and Pensions have also confirmed they will implement shorter, simpler annual pension statements from October 2022, which will aim to make it easier for savers to understand the state of their retirement savings.

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