Almost half (49 per cent) of defined contribution (DC) scheme members do not know what their pension scheme is invested in, according to research from Wealth at Work.

It found there was a “general lack of pension understanding”, with 29 per cent of DC savers unaware that their pension was even invested.

Furthermore, 38 per cent said they did not know that their pension had a range of investment funds to choose from, rising to 44 per cent of those aged 55 and older.

Nearly a third (30 per cent) were unaware that if they did not choose where their pension was invested, it would automatically be put into their pension provider’s default fund.

More than a fifth (21 per cent) said they had chosen their pension investments based on their values and beliefs, such as environmental or religious beliefs, with 40 per cent revealing they would increase their contributions if they knew their pension was invested in funds that aligned with their values.

This increased to 48 per cent for respondents aged between 18 and 34 years old.

“It is widely recognised that people need to be more engaged with their pension savings and investing more for their retirement,” commented Wealth at Work director, Jonathan Watts-Lay.

“So, it’s worrying that our research shows that many people don’t realise that a pension is an investment, or even that they have a choice over how their money is invested in their pension.

“Particularly concerning is that this worsens for those approaching retirement (age 55+), as at this point people need to consider how they plan to generate a retirement income and ensure their pension investments or ‘glide path’ is aligned with this.

“In recent years there has been a significant expansion of environmental, social and governance (ESG) considerations, with people wanting to align their pension investments with their values and beliefs.

“However, ESG is a broad category and it means different things to different people, with no one size fits all approach. There will be some people who care passionately about environmental issues and others will have religious beliefs to take into account when making decisions.

“Some might want to invest in companies that promote social cohesion, greater representation and diversity. It may be that others are just wanting to choose investments that are having a positive impact on the world. But simply knowing that pensions can be used to make a difference can be a powerful way to switch people on to better engage with their long-term savings.”

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