Millions of workers in state of 'pensions inertia'

Nearly a third (30 per cent) of Britain's 8.8 million active occupational pension scheme members pay no attention to how their retirement savings are invested and 29 per cent - more than 2.5 million scheme members - have never reviewed how their chosen pension fund is performing, according to new research from Prudential.

The pension provider's study also shows that 48 per cent of workers aged 25-plus have their money invested in the ‘default' fund of their company pension scheme.

And pension savers are failing to take an active role in managing their assets to produce the best possible retirement income. Around 29 per cent admit they have never reviewed the progress of their selected pension funds.

Prudential warns that workers who do not regularly review the progress of their pension fund to deliver asset growth, or simply select the default fund offered by their employer without studying any other options available to them or seeking advice, could then risk limiting the value of their pension pot at retirement.

Andy Brown, Director of Investment Funds at Prudential, said: "It's worrying that so many people who pay into a company pension scheme appear to be in this state of inertia and aren't taking an active role in the management of their pension savings.

"You routinely check your savings, utilities, insurance cover, mobile phone contract and broadband arrangements to make sure you're getting the best from them, and checking the performance of your pension should be no different."

Regular pension reviews essential

Prudential urges workers who have not reviewed their pension investments, especially during the stock market turbulence of the past two years, to review them now as a priority to ensure they are correctly positioned to take advantage of any market upturn.
But many pension scheme members are doing virtually nothing to ensure their pension funds are invested in the best place to maximise growth and maintain the right balance to protect fund values in the last few years before retirement.

Only 20 per cent of defined contribution pension scheme members say they took an active role in selecting the funds in which their pension is invested from a range of funds offered by their workplace pension scheme.

Professional advice neglected

A further 37 per cent say they have never taken any other action with their pension fund such as seeking independent financial advice, talking to their employer or making additional voluntary contributions.

Just 13 per cent of defined contribution scheme members surveyed said they had seen an independent financial adviser to discuss fund choice and review pension progress while 17 per cent have either taken a pension contribution holiday or stopped paying in completely.

Maximising a DC pension

Andy Brown continues: "If you're an employee paying into a pension scheme, you have taken the first important step towards building up a fund to provide you with an income in retirement but you stand a greater chance of maximising its value if you review your fund arrangements regularly.

"People need to find out who is responsible for managing the pension scheme in their workplace and talk to them about the various options available which may help to maximise growth and minimise risk.

"If you've chosen the ‘default' option, it should be because it best suits your needs and not because you don't understand or aren't interested in finding out what else is available."

When it comes to paying more money into company pension schemes, Prudential's research found that 37 per cent of people with a defined contribution pension have either made Additional Voluntary Contributions to their pension fund or increased the amount they pay in.