Research from the Association of Investment Trust Companies suggests that while active investors are geared up for pensions A Day, the message is still not getting through to the general public.
Some 83% of active investors are familiar with the upcoming pension changes, with a significant 25% of these poised to change their pension portfolios as a result of the new flexible rules. In contrast, 71% of the general public are still in the dark and have not heard about the impending pension changes, while only 3% plan to make any changes to their pension portfolios after A Day.
In light of these figures and with A Day fast approaching, the AITC believes its a relevant time to highlight the importance of financial education. Stephen Timms, minister for pension reform, recently spoke at an EU/UK Presidency event in Brussels on how Europe must ensure people have access to financial education and information so they can make confident choices about their retirement. However, the AITC believes the government needs to mandate sufficient time, as well as financial resources, to help make this a reality in the UK.
Annabel Brodie-Smith, communications director for the AITC, says: “With so many people in the dark about pensions simplification, if ever there was a relevant time to raise the issue of financial education must surely be now. The very significant knowledge gap identified by this research illustrates something the AITC has known for many years – being financially aware can have a real impact on your financial decisions, not to mention your wallet.
“A significant proportion of those active investors who have heard about pensions simplification are already planning changes to their pensions. But with the majority of the general public unaware, it looks like the winners, in the short-term at least, are not surprisingly going to be the financially savvy minority.
“With nearly one million out of two million child trust fund vouchers still uninvested, yet another chance to educate consumers about key financial decisions is being missed.
“The pension changes present a real opportunity for the financially aware or those who have access to advice, but unless the issue of financial education is addressed the majority of people are going to miss out.”
The research also highlighted some differences between active investors and the general public when it came to attitudes towards investment risk.
Some 17% of the general public say they are not prepared to take any risk with their money, even if they have to sacrifice potential returns. Not surprisingly only 2% of active investors feel the same.
36% of the general public is prepared to take on some investment risk, but with the caveat that they would at least want a guarantee of getting their original capital back.
Some 20% of active investors felt the same, but while 65%) say they are prepared to take on a reasonable amount of investment risk, only 11% of the general public feels the same.
When it came to very high investment risk levels, just 2% of the general public say they were prepared to take a high degree of risk with the potential for substantial returns, compared to 12% of active investors.