Pensions: 45% of people have never reviewed their pension


A new survey has shown just how few people ever review their pension and that an increasing number are turning to friends and family for financial advice.

Whilst the research, carried out by the investment firm Baring Asset Management, showed that the majority of people, who have not yet retired, recognised that it was important they understood how their pension was invested, a large percentage of people had never actually reviewed their pension.

Attitude to risk

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One of the keys to investing successfully is to make ensure the investments chosen match an individual’s attitude to risk. Put simply, someone who wants no risk to their capital would not invest in shares. Conversely, an adventurous investor would generally be happy to put large amounts of their savings into shares.

The survey found that 58% of people said they considered it their responsibility to fully understand how their pension funds were allocated.

However, an astonishing 45% of people had never considered whether they were taking too much or too little risk and 38% of people had never changed how their pension was invested.  Amongst those people who had reviewed their pension this was last done, on average 2.4 years ago.

Equally as concerning, amongst those people who had reviewed how their pension was invested, 41% were unable to say whether they had selected their own funds or a default option. A smaller number, 31%, knew they had selected the default option, but did not rate the advice they had received highly.

Marino Valensise, Chief Investment Officer at Barings, said: “Millions of people may be exposed to poor asset allocation and inappropriate levels of risk due to a refusal to review their pension investments regularly and with the correct levels of advice.”

He continued: “While it’s good that the majority of people see it as their personal responsibility to monitor and understand their pensions, they need to follow this up and make sure they are speaking with their financial advisers. This is more important than ever given the current volatile economic environment.”

Pension advice

The survey also looked at where people turned when they needed pension advice.

The most popular source of advice was professionals, such as IFAs (Independent Financial Advisers) and accountants, with 34% of people choosing this option. Although, this was down from a peak of 40% in 2008, when the credit crunch was biting hard.

Friends and family are becoming an increasingly popular source of pension advice, with 23% of people saying they would seek advice here, up 8% on last year. Amongst younger people, aged between 18 and 24, the figure rises significantly to 37%.

Interestingly, those people preferring to seek advice from their bank rose from 9% in 2011 to 15% in 2012. The rise comes despite the banks regularly being found guilty of miss-selling and topping the charts of most complained about financial institutions.

It is interesting, with the FSA’s Retail Distribution Review (RDR) just around the corner, that an increasing number of people are choosing friends and family for pensions advice, whilst the number seeking professional advice remains flat.

The RDR will significantly change how financial advice is paid for, with a ban on commission being taken when people invest money via advisers. Many experts are concerned that the changes will make it harder for people to afford good quality independent advice and the survey by Barings could be the first example of people, especially younger generations, having to find alternative sources of advice.

Marino Valensise again: “It will be interesting to see how the findings have changed next year in the wake of the Retail Distribution Review, and whether the sources of advice continue to split. During these times of such economic uncertainty it is surprising and somewhat worrying that people seem more inclined to ask friends and family for advice.”

He continued: “Understanding pension investments is more important than ever to ensure that it will provide appropriate financial support in retirement. With increased awareness of the on-going financial crisis it is our hope that people become more aware of their pensions and the underlying asset allocation, and that we will see more people properly reviewing and examining their portfolios and making sure they have the optimal asset allocation.”