Levels of disengagement among members of workplace pension schemes have leapt since the introduction of auto-enrolment, according to Aviva, as a million and a half people have no idea where they retirement funds are invested.
Using figures from the Office for National Statistics, the provider found that in the 2015-16 tax year, 1.5 million members of defined contribution schemes did not know where their money was invested.
That accounted for 15 per cent of the 9.8 million people in workplace DC schemes, up from 9 per cent in the 2012-13, when auto-enrolment was introduced.
Among employees of small businesses the figure was even higher, with almost one in five saying they were not aware of their fund choices, a figure Aviva predicted would rise as auto-enrolment continued to roll out to smaller businesses.
Of those who chose to opt-out, 24 per cent said it was because they were too old to make it worthwhile. In the 25-34 age group, 13 per cent thought they were too old to start, a statistic Aviva described as “worrying”.
Andy Curran, managing director for corporate and business solutions at Aviva, said: “It is vital employees engage with the processes behind their pension. We must continue to make every effort to ensure people have all the support they need to make the most of their pension provision.”
Gordon Bowden, a financial adviser with Quainton Hills Financial Planning, said he was not surprised by the findings, adding the key to improving engagement is to make the information simpler.
“I think people would like to engage more, but they don’t know how to, and providers make it much more complicated than it needs to be.”
He said pension providers should emulate the user-friendly online experience of banks, adding that annual statements should be radically overhauled.
“People get their annual statements and they don’t read them because they are full of superfluous information. With a DC fund, people want to know how much is in their fund and what that will get them in retirement.”