Pension problems: 20 findings from the CISI's consumer survey

As the Chartered Institute for Securities & Investment publishes its UK-wide consumer survey on financial capability, we round up all the key conclusions from its inquiries.

Survey says...

The Chartered Institute for Securities & Investment (CISI) conducted its 'omnibus survey' on attitudes, knowledge and behaviour of the UK population towards pensions between 6 and 7 December last year. 

Its aim was to gather information about the attitudes of a cross-section of society towards pensions, financial capability, green and social impacting investing, along with the hopes and the realities of people's actual retirement prospects.

Click on to read more.

Survey says...

The Chartered Institute for Securities & Investment (CISI) conducted its 'omnibus survey' on attitudes, knowledge and behaviour of the UK population towards pensions between 6 and 7 December last year. 

Its aim was to gather information about the attitudes of a cross-section of society towards pensions, financial capability, green and social impacting investing, along with the hopes and the realities of people's actual retirement prospects.

Click on to read more.

Pension problems (part one)

The CISI has found startling differences in people's understandings of pension.

According to its survey, of those aged 55 and above in work, a quarter (26%) knew what a pension was but did not know how it worked. 

 

Pension problems (part two)

Of those workers who were contributing to a pension, over half (56%) of those surveyed didn't know how much money they were paying into their pension each month.

In addition, there was regional differentiation of understanding. 

For example, those in Scotland and London are least likely to know (62%) compared to those in the East of the UK (47%) and 49% of those in the Midlands.

Pension problems (part three)

It will not come as a surprise to anybody that levels of engagement with the specific amount within pension funds was lacking. 

However, just how little is understood was clearly an issue that emerged at the forefront of the survey's conclusions.

According to the CISI, three quarters (76%) of respondents said they did not know the actual value of the fund. 

Pension problems (part four)

Moreover, significantly more women (80%) had no clue about the value of their pension fund in comparison with their male counterparts, (72%). 

Regional differentiation was once again part of the picture here, with those in Scotland registering as least likely to know the value of their pension. 

Pension problems (part five)

Checking the status of your pension (whether it be private or one provided by your employer) is a vital basic task that is clearly not being done enough.

With the long-running absence of an easy-access pension dashboard still very much evident, the CISI found that over a third of its respondents (34%) said that they never checked the status of their pension account.

43% of this group were women and 28% were men.

Pension problems (part six)

Continuing its examination of consumer engagement, the CISI found that just under a third (31%) of its respondents checked their pension less than once every six months.

Furthermore, a quarter of over-55s stated they never checked their pension. 

That, compared with figures showing that 81% of people saying they check their bank account at least once a week, shows how the industry has some way to go before pensions are viewed in parallel to people's day-to-day finances. 

Pension problems (part seven) 

So, you have been auto-enrolled into your workplace pension by your employer. Great news.

But the elephant in the room is that you know that whatever is in the pot at the end of your career probably will not be enough on its own to fund any kind of long-term retirement (let alone care). Shucks.

With this in mind, it may be worth considering extra pension contributions (that is guidance, not advice).

But according to the CISI, only one in 11 people (9%) reported that they were making additional contributions to their pension fund.

 

Time for the tax bit

To be fair to those who responded to the survey, 39% said that they had considered making additional contributions to their pension, even if in practice they had not done so.

However, of those that had considered or were considering making additional payments at the time, a third (36%) of people were unaware that their contributions could benefit from tax relief.

 

Hopes and dreams

According to the CISI, most of the workers who responded to its poll said that they would like to retire younger than they believed they will.

Apparently, 56% said they wanted to retire in their 60s. In contrast, however, only 40% thought that they would actually retire in their 60s.

 

The alternative view...

There was a group of people in the CISI's survey who did not want to retire, however.

Admittedly it only consisted of 4% of the overall respondents, but it is surely significant that at a time when the state pension age seems to be later and later, some people are apparently content to carry on working. 

Maybe they love their jobs enough to carry on. Maybe the state pension is already supplemeting their income. Either way, this is a group to watch in future. 

The stark realities

For some, though, retiring when they plan to just is not going to be possible.

This is witnessed by the shockingly small number of those who replied to the CISI's survey saying that they felt able to retire when they wanted.

According to the CISI, only one in eight (13%) said they would be able to retire when they wanted to because they believed they had saved and planned appropriately for retirement. 

This figure rose to one in six for men (16%) but was only one in ten (10%) for women. 

A phased approach to retirement

One option available to those who cannot retire completely is to do a phased retirement. That could involve working a couple of days per week, or re-skilling to do a different (part time) job altogether.

But according to the CISI's report, this option appealed to just a quarter of respondents (25%).

Meanwhile, one in nine (11%) of workers said they wanted to keep working for as long as possible. One can only wonder whether this is because they wanted to or because they felt they had to...

 

Money, it's a gas...

Surprising nobody, money was cited as a crucial factor in determining people's ability to retire. 

Almost a quarter of respondents (23%) said that they were not sure they would be able to retire when they wanted to because of financial commitments. 

 

Living standards...

When one retires, the dream is that one's living standards will increase. 

But for many people who responded to the CISI's survey, the future did not seem so bright.

Indeed, almost of workers who hoped to retire believed that their standard of living would decrease in retirement. 

38% felt their standard of living would stay the same (39% of 18-24 year olds!) while 8% felt it would increase during retirement (18% of 18-24 year olds!)

Day dreaming?

According to the CISI, most workers who hoped to retire expected to fund this decision through their workplace pension (58%) or state pensions (57%).

Perhaps worryingly, more than a quarter (27%) said that they will rely on their private pension or on their bank savings, with the latter being most popular for people aged under 35. 

 

Alarm bells!

Perhaps even more worryingly, 10% of respondents to the CISI's survey said they did not know how they would fund their retirement!

Given the embarassment that poll respondents may have felt when questioned about their future financial plans, one can only wonder whether this number should in fact be a lot higher...

After all, no-one likes admitting short-comings...

Ethical investing (part one)

Nowadays it is apparent that far more people really do care about where their pension is invested. 

Perhaps it speaks volumes then, that according to the CISI, the majority of respondents were actually aware of how their pension fund was actually invested.

28% said they were unaware of how their pensions were invested.

Ethical investing (part two)

Those who responded to the survey seemed most concerned about the following investments:

1. Armament companies or countries with alleged dubious human rights records (69%)

2. The tobacco industry (56%)

3. Gambling companies (54%) 

4. The alchohol industry (35%)

Apparently young people were 'noticeably' more concerned about investing in the alcohol industry (43% of 25-34 year olds) compared to 30% of 35-44 year olds.

 

Community

Again, there seems increasing awareness of the importance of investing in community or environmental projects.

Key statistics the CISI has highlighted include:

1. 56% of all workers with a pension were interested in investments in community and 61% environmental projects.

2. 45% of all workers with a pension were interested after finding out that the return on community project investments could be lower (44% environmental projects).

3. Social conscience indicators like the one above were highest amongst women (69%-66%) than men (56%-48%) and higher amongst young people (18-24 year olds 67%) than in those aged 55+ (51%).

 

IFAs reign supreme

It is absolutely a credit to IFAs that, according to the CISI's survey, the most trusted person a worker in the UK would go to for financial advice was a qualified financial adviser. 

46% of respondents believed this to be the case.

Moreover, this represented an increase from 41%, when the same question was asked in a CISI survey in 2016.

Good friends and relatives came close at 28%, with banks still lagging behind at 25%.

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