The shocking lack of knowledge about pensions in the UK was recorded recently by a YouGov survey that showed 74% of people who are of working age either do not understand or have never heard of the tax relief, what they receive on their workplace pension contributions.
The survey was commissioned to gauge people's understanding of workplace pensions and the results were both startling and worrying. The lack of understanding was borne out by the fact that 50% of those who had a workplace pension said that they would increase the amount they save into their workplace pension if they were to get tax relief on their contributions. This is despite the fact that most savers already receive this tax relief, showing the complete lack of knowledge that the public have about their workplace pensions.
The lack of knowledge that the public have about their workplace pensions. This is despite the fact that in the last three years we have seen the advent of two of the biggest changes to UK pensions, which has meant that the issue of pensions has been much discussed in the press and on TV. Pensions freedoms have now enabled pension savers to do what they like with their money on retirement instead of being forced to take an annuity, and auto enrolment will see virtually every full time member of staff every business in the UK auto enrolled into a workplace pension scheme. The latter has even been the subject of a television advertising campaign fronted by ex-Dragon's Den star Theo Paphitis.
Some people have pointed to the fact that tax relief is not an incentive to save as it is too complex for most people to understand. However, this is a rather negative view of the British public. The fact is, the government seemed to have missed a trick in their promotion of pensions to the general public.
There is no denying that the government have been proactive in promoting pensions as a way of saving for retirement, and the introduction of auto enrolment has really been a masterstroke, with 90% of those people auto enrolled choosing not to opt-out, which is far more than the government first estimated. However, the fact is, that whilst the government has been pushing the need for pensions, they have missed the opportunity to educate people about pensions. The more people understand about pensions then the more they will understand that they are a brilliant way of saving for retirement. With workplace schemes, their employer contributes to them and they are very tax efficient too. Don't just tell people to get a pension, tell them about pensions and foster a real understanding in them. Then we'll see an even higher takeup of pensions. And that can only be a good thing.