Advisers have backed Aviva research revealing that two thirds of over-45s pay little or no attention to their pension pots, but those who did went on to reap the rewards.
The provider commissioned ICM Research to carry out an online survey among more than 1,500 over-45s who have not yet retired, and found that 63 per cent did not bother to check on their pensions.
Office for National Statistics data estimates there are 8.1m active occupational pensions and 8.2m active members of private pension schemes, so Aviva suggested that this means just over 10m savers are ignoring their accumulated wealth.
Clive Bolton, the firm’s managing director for retirement solutions, commented that an alarming proportion of the UK’s pensions pots are being left unmonitored, with many simply ignoring their pension statements and hoping for the best.
“Having multiple pension pots can make things more complicated, but it doesn’t necessarily have to if people keep careful track of their savings. However, our research has shown that many people find managing their pensions difficult and consolidating could therefore make it easier for them.”
Of those who have consolidated their pots, 21 per cent did so because they took the advice of their financial adviser – however, nearly the same proportion (19 per cent) did so because they found it easier to manage.
The survey also found that only 7 per cent of over-45s used pension updates in discussions with their financial adviser, rising to 9 per cent among 65-74s.
Graeme Mitchell, managing director at Lowland Financial, told FTAdviser that they get a lot of people getting in contact about their pension pots, with many being pleasantly surprised by how much they have.
“However, many also don’t pay any attention and chances are they’ll be in the types of funds that are out of date, expensive and not right for them; so it’s always good to check. But then I would say that.”
Andrew Gardner, partner at Paul Young Independent Financial Advisors, agreed that having carried out hundreds of pension reviews in recent years and consolidated many plans, nobody has any idea how much their funds are worth or where they are invested.
“I think the industry change from commission to fees and the need to outline specific service options will help to improve matters. We now have hundreds of clients paying a fee to have their pension portfolios undated and reviewed every three months.”
Phil Stevenson, chartered financial planner at Ark Financial Planning, expressed surprise at Aviva’s two-thirds figure, suggesting that it is more like 90 per cent of people not checking their pots.
“Generally speaking clients don’t understand pensions and what it is they have got until retirement is around the corner. I regularly see at-retirement work and think if only you’d been sat in front of me 10 or 15 years ago.”
Mel Kenny, chartered financial planner at Radcliffe and Newlands, commented that people do not engage with their pensions because either they believe the pots are too small or the annual statements “either suffice or are so difficult to understand they daren’t get yet another update they don’t understand”.
Greg Heath, managing director at Derbyshire Booth Financial Management, explained that as a golden rule they tell new clients that if a pension is more than five years old it is out of date and needs a review.
“This is due to fund changes (some closures or merging of funds), economic changes, investment funds being launched or charges being lower on new plans. The unbundled charges on many platforms are significantly lower than the like of stakeholders pensions.
“We tend to find that people don’t really take their affairs seriously until they see their parent retire, so normally about mid 40’s; hence many new younger clients tend to be the children of clients we advised on in their retirement.”
Matthew Harris, IFA and owner of Dalbeath Financial Planning, said they send out updates every three to six months on the pension pots managed on behalf of clients.
“It is important to keep on top of things, but when investors get too obsessed with weekly or even daily moves in their holdings this can lead to negative behaviour such as panicking out of good long term positions, or buying at the top of a market cycle.
“We are certainly in favour of consolidating pension pots though, as this not only makes them easier to manage and monitor but also cuts what clients pay in charges on old, often expensive policies.”
peter.walker@ft.com
