You may not know as much as you think about your pensions and finances, according to new research.
Most savers and investors have scant knowledge of financial basics, the study carried out for online platform The Share Centre revealed.
A fifth of pension investors had no idea their money was invested in the stock market, the research found.
One in four people do not know how much the State Pension pays out
A quarter of those under 34 years old believe the State Pension pays more than £10,000 a year.
Huge knowledge gap
The responses came from a broad range of 1,500 people aged 19 to 87 years old.
Most confusion was about how much the State Pension was worth, with those aged under 34 believing they would receive around £4,000 more a year than is the case.
At least 57% of those questioned told researchers the State Pension was unlikely to still be around by the time they reached retirement.
“People just don’t seem to understand how pensions work and the research has highlighted a huge knowledge gap,” said Richard Stone, the Share Centre’s CEO.
“This lack of knowledge and over estimate of how much the State Pension is worth could mean many savers are put off investing money when they are younger, especially if they have financial pressures from paying off student loans, finding a home and bringing up a family.”
Equity ISA popularity rising
Stone also explained that despite pension freedoms, many savers are leaving their money invested and the company has seen a large in flow of cash into ISAs.
“The amount invested in ISAs has risen by 13% in a year and we expect the amount to keep growing,” said Stone.
“We can see a lot of people investing in equity ISAs even though they lack the tax breaks of a pension, are more liquid if savers need to get their hands on cash and there’s no tax to pay on any money withdrawn.”
Answers to the points above:
The basic State Pension will pay £119.30 a week from April 6, 2016, while the new flat-rate State Pension will pay £155.65 a week.
From April 2016, the basic State Pension is worth £6,203.60 a year and the flat rate pension comes to £8,093.80 a year.