Pension savers fail to join up the dots between their cash and what it is invested in

Published by Edmund Greaves on 10 May 2019.
Last updated on 10 May 2019

workplace pensions

An alarming number of pension savers do not know that their pension pots are actually invested in the stock market.

Less than one in three (28%) of workplace pension savers were aware that their pension pot was invested in the stock market according to research from investment platform Hargreaves Lansdown.

The firm found the stats were even worse among women, with just one in five (19%) knowing that a pension fund invests their retirement savings.

This suggests that despite the success of auto-enrolment, a government initiative to help more people save for later life through a pension scheme at work, there is a woeful knowledge gap for workers.  

Most workplace pensions invest in so-called default funds, but as Nathan Long, senior analyst at Hargreaves Lansdown, points out these funds are not right for everyone.

“In particular those with ten to fifteen years to retirement can often to take a less conservative approach,” he says.

Instead, by taking control of your pension and deciding upon where it is invested savers could end up with a better outcome – a larger pension pot. 

Default funds are often more conservatively invested. Hargreaves says investing in other funds that improve annual growth by even just 1% can have a huge impact.

Mr Long says: “The best kept secret in retirement planning is that you can actually boost the rate at which your pension grows.

“We’ve become accustomed to endless calls to pay more money in to our pensions, but there is an equally important way to improve what your pension pays when you finish work, and that’s to help your pension investments grow faster.”

However,  savers can be restricted in regards to where they can invest their pension cash as it depends scheme to scheme.

Big pension providers like Nest offer a small selection of funds, but others offer none at all, such as Now Pensions.

It is also increasingly important to consider if you want to invest your money ethically. Many providers also now offer ethical investment options if you don’t want your hard-earned pension savings to be invested in businesses that harm the environment.

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