A lack of understanding around what it takes to apply for a self-invested personal pension and how to transfer in funds is causing savers to avoid choosing this wrapper in retirement, research has found.
Research from investment platform EQi, published yesterday (December 15), found out of 2,000 individuals, 11 per cent believed setting up a Sipp would be too complicated or that mistakes would occur when transferring pensions.
In addition, 9 per cent said the process would take too much time and effort and 13 per cent felt they were not confident enough to select investments that they would like to place their pension savings into.
About 14 per cent of savers said they have never heard of a Sipp, while a further 12 per cent were aware of the product but did not understand the rules around moving pensions.
Meanwhile, 7 per cent did not even know they could move or consolidate their pension pots.
Richard Pearson, director at EQi, said people should be educated so they feel encouraged to explore different avenues with their pensions.
Mr Pearson said: “Workplace pensions have been an undeniable success, but a big part of the problem in the UK is that every time someone starts a new job, they get a new pension. This makes things much harder to track.
“By enabling savers to consolidate pots into one account, Sipps could go some way to alleviating this issue, giving people greater oversight over how much they have saved and what’s being charged in fees.
“Our study highlights various misconceptions which stand in the way of people exploring an avenue which could potentially make a lot of sense however, so a bit of education could go a long way.”
One in ten savers said they would feel more compelled to open a Sipp if they were given assistance when making the application.
However, a similar amount (12 per cent) were put off by scams and the fear that they might end up losing their pension or be exposed to fraud or mis-selling by opening a Sipp.
But Mr Pearson said this alone should not be a reason to not explore this pension offering.
Mr Pearson said: “Of upmost importance for anyone transferring their pension is to have complete confidence in their provider, so it’s vital to verify a firm with a financial adviser or reputable personal finance website in the case of any doubts.
“People should absolutely be wary about the risks, but it would be a shame if this stopped people achieving a potentially better financial outcome.”
He added: “A pension is probably the most important financial product most of us will ever have, and for lots of people it will be the most valuable, often worth even more than our homes.
“For many, a Sipp could be exactly what’s needed to gain a sense of control of their retirement plans and engage with their pension for the first time.”