6 August 2008

Millions are leaving their retirement futures to chance by failing to review their pensions’ portfolio despite the credit crunch, says Baring Asset Management.

According to new research, 13.6m people in the UK have never checked up on their pension plan and a further 2.2m have neglected to do so in the last five years. Only 22 per cent reviewed their fund’s asset allocation during the past twelve months, down from 28 per cent the year before.

Marino Valensise, chief investment officer at Baring Asset Management, said that the statistics were very worrying: “It is surprising to see that so many people still have no idea where their money is being invested or, indeed, whether their pension is producing the returns necessary to support them in retirement. Coupled with the fact that people are not putting aside enough funds in general for their retirement, it’s clear that many people could face a serious shortfall when they reach retirement age.”

Valensise told Pensions Age that the problem is worse now because people have more pressing financial demands to worry about. “The average household in the UK has got a higher leverage than the average household in the US. The effect of the credit crunch and the non availability of credit will probably be felt here in quite a dramatic way. I think this has just started but I think people have really started to worry a lot.” This means that individuals are not able to concentrate on the long term benefit of having a pension because, as Valensise pointed out: “At the end of the game people have to eat.”

Barings’ research has also revealed that out of the 46 per cent who have reviewed their pension portfolios, only 19 per cent had chosen the fund allocation themselves. Forty per cent said they had opted for the default fund, but 18 per cent could not remember if they had chosen the default or not, and 23 per cent did not know. Young people are also less likely to review their pension plans, with 56 per cent of those in the 18-34 and 25-34 age bands having never reviewed their plans compared to 25 per cent of those in the 55-64 age group.

- Pensions Age August 2008