Most pensions savers do not know their retirement funds are invested in the markets, according to research from Hargreaves Lansdown (HL), which found that 40 per cent of people surveyed know that their pension was invested in the stock market.

Women were more likely to be unaware of how their pension funds are held than men. Only 28 per cent of women were certain that their pensions were invested in the markets, and just over half (51 per cent) of men were aware.

Hargreaves Lansdown head of workplace saving analysis, Clare Stinton, said: “Pensions are often our first investment, but a worrying number of people are completely in the dark about it.”

A lack of understanding and awareness could leave people with lower funds that they might have had, as people fail to take up opportunities to increase pensions investment for the future, eschewing potentially simple steps due to a lack of awareness.

For example, said Stinton: “Starting early and understanding the power of compounding can do a lot of the hard work for you.”

The gender gap is of special concern, Stinton added: “For women in particular, turning their attention to their pension investments could bring them one step closer to bridging the gender pension gap, which on average sees them retire with significantly less than men.”

Speaking of those savers nearest to retirement age, Stinton voiced the specific concern that standard management of pensions may not fit people’s individual requirements.

HL’s survey showed that only 30 per cent of women and 52 per cent of men aged between 55 and 64 knew their pensions were invested in the markets. For many of these, workplace pensions will automatically shift into lower-risk investments as they near retirement.

However, Stinton said, this may not be the most appropriate course of action. “This approach can work well if someone is planning to buy an annuity, but this won’t be everyone,” she said.

“For those opting to use drawdown, keeping a portion of their pension in shares could actually help grow their pot, even after they start withdrawing from it.

The lack of a clear and appropriate plan could place savers, particularly those close to retirement, in a precarious position, Stinton said.

“It’s like cruising through a long-haul flight on autopilot, only to step into the cockpit for the very first time to land the plane,” she added.

“It’s vital those approaching retirement access all the support they need. This could be through guidance services like Pension Wise or going down the financial advice route. Under targeted support, providers will also be able to play a bigger role in helping people make more informed decisions.”

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