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New research reveals final salary pension holders lack understanding and interest in their defined benefit pension scheme.

  • One in three people don’t think they’ll have enough to live on in retirement
  • One in four people (24 per cent) believe that their defined benefit (DB) pension income will be the same as their annual salary 
  • Just two fifths (40 per cent) have discussed pension pots and savings with a professional financial adviser
  • Approximately 7.5 million DB pension savers (75 per cent) don’t know their pension is protected by the Pension Protection Fund

Only 49 per cent of DB pension holders are concerned about knowing how much their defined benefit  pension scheme is worth, according to new research shared by Pension Protection Fund (PPF). The study reveals an acute lack of understanding and engagement among a sizable proportion of pension scheme members when it comes to their DB pensions.  

The research – which was based on a survey of 2,000 DB pension scheme members – found that one in three (33 per cent) were concerned about not having enough to live on in retirement and many are uninformed about what having a DB pension means for them and their savings.

Almost one in four people (24 per cent) believe their DB pension will be the same amount as the annual salary they receive or received from the employer associated with their DB scheme. Additionally, while only one in five (18 per cent) of all those surveyed are unaware that a DB pension provides retirement income for life, this figure rises to 42 per cent for 18–34-year-olds.

The confusion around DB pensions could mean that many people aren’t able to plan for their retirement based on accurate information. The research showed that:

  • 30 per cent of those surveyed believe that they had to be working for their employer at the time of retirement to receive the DB pension
  • Roughly the same number (29 per cent) were unsure if they could access a DB pension before they retired. This figure rose to 40 per cent amongst women. 
  • Over a third of DB pension holders were unsure if they could transfer out of their DB pension scheme. 

The research also uncovered that a staggering 75 per cent of DB pension savers didn’t know their pension was protected by the PPF if their employer failed, and that 60 per cent of 35 – 54 year olds had considered transferring out of their scheme due to concerns of a high profile insolvency. 

Sara Protheroe, PPF Chief Customer Officer said: “It’s extremely worrying that so many people with DB pensions are unaware of the valuable protection available to them if their employer failed, and this may result in inappropriate DB transfers. It’s also concerning that one in three people are concerned about not having enough to live on in retirement yet fewer than half know how to find out how much their defined benefit pension scheme is worth, particularly when our research also revealed misunderstandings around how much a DB pension typically pays. We already know that the nature of retirement is changing, with people working and living longer, so it’s really important that individuals make 2022 their year to get retirement ready and take the time to understand how their pensions can help them achieve their retirement goals.”

Lack of engagement

The study also reveals a lack of engagement with DB pensions. As well as almost half of those surveyed stating they weren’t concerned about knowing how much their pension was worth, the research worryingly revealed that:

  • 58 per cent weren’t concerned about keeping in touch with their DB pension scheme administrator. This number rose to 76 per cent amongst over 55s. 
  • Almost half (48 per cent) of DB pension holders surveyed have never met with a financial adviser to discuss their retirement savings.
  • Just two-fifths (40 per cent) have discussed their pension pots and savings as a whole with a financial adviser. 

Since the introduction of Pensions Freedoms, DB pension holders must receive financial advice if they are considering transferring out of their scheme and their benefit is worth over £30,000. Administrators provide key information on pension value, scheme benefits and possibly even scheme rule changes that may affect what members receive when they retire.

Sara Protheroe added: “Getting retirement ready is essential, and the earlier you do this in your working career, the better. This is why we want people to make 2022 the year they engage with their pensions, regardless of age. Our findings suggest that many people could be heading into retirement without enough income to support their plans or could even be missing out on retirement income they’re owed due to lack of understanding and engagement. It’s vital that 2022 is the year to change this which is why we’re sharing four easy steps people can take to engage with their DB pension.”

PPF’s Tips for Getting Retirement Ready in 2022

1. Engage with your pension 

Engaging with your DB pension provider is key to getting retirement ready. A good place to start is to check any correspondence you may have received from your pension scheme. Some pension schemes also provide an online service where you can check your benefits on their website. If you’re not able to do this, engage with your former scheme and ask them to provide an up-to-date benefit statement each year as this will help you keep track of what you might expect to receive when you retire. At the Pension Protection Fund (PPF), we give you access to digital tools on our website which will allow you to plan for your retirement, and you may find some of your former schemes offer this digital service too.

 2.    Seek financial advice

Speaking to a professional financial adviser is a good option to understand how your savings and DB pension can work together to fund your retirement plans. Seek advice early as an adviser will help you decide if this is the best option for you based on your savings and goals and you will still have time to make changes if you need to before you retire. 

3.    Check for lost pension pots

Any DB pension that you’ve had throughout your working career will be yours, regardless of whether or not you are currently working for that employer. If you have lost the correspondence from a previous scheme, there are several avenues you can explore. Firstly, the Pensions Tracing Service is a free government service which has been designed specifically to help people who have lost track of their pensions. Secondly, if the employer who offered you your DB pension is still in business, they should be able to help you get in touch with your pension scheme. Or, if you know your former company was taken over by another business, contact the new company’s HR team as they should be able to tell you who to contact about your pension. .

4.    Speak to your employer

If you’re still employed by the company that offered you your DB pension, your HR team is also a great starting point if you want to engage more with your pension. They’ll be able to direct you to find out how much your DB pension could be worth, as well as share further information on your scheme provider. You can also speak to them about topping up your pension through an additional voluntary contribution (AVC) scheme.

For further press information contact:

PPF Press Office
020 8406 2107
[email protected]