Complex pensions are barriers to saving says DWP

The Momentum UK Team 28 November 2012

An substantial number of people find preparing for their retirement too complicated, a study from the Department of Work and Pensions (DWP) has found.

The study which questioned 1,949 UK adults between February and June 2012 found that up to 60% did not have an adequate understanding of how the savings and retirement process worked.

Of those questioned, many thought that they would reach state pension age (SPA) earlier than they will in reality. With over half of women (62%) and at 38% of Men displaying a misunderstanding as to when they will reach SPA. This raises concerns over misunderstood expectations surrounding retirement, and the level of preparation being taken.

The study also found divisions in understanding between the genders.

High levels of women said that they found saving for pensions ‘complex’ with 28% saying that it scared them. These statistics compound the criticisms that pension saving schemes need to be clearer.

Despite all the statistics to the contrary one positive aspect can be found in the increase in attitudes towards responsible saving. 49% agreed with the statement; ‘It’s not the government’s job to advise people on how much to save for retirement’. This is up from 34% in 2009.

In addition, the governments Auto-enrolment scheme received positive acclaim. Of those questioned a substantial proportion, 68% said that it was a good idea.

In a statement to the Daily Telegraph, Pensions Minister Steve Webb said;

“Automatic enrolment is helping millions to save for the first time and this survey shows most people will ‘stay in’ when they are offered the chance to save in a pension.

we are working with the industry to restore trust and confidence in pensions and we will reform the state pension to make it simpler and clearer to understand."

However, the study also revealed a substantial economic divide in an ability to prepare. Over half of those struggling with day to day financial commitments had no resources for later in life. Whereas a person with a household income of £44,000 or more was almost certain to have a private pension in place.