Pension savers are in favour of more of their retirement pots being invested in UK assets, but only if it results in better returns.
Research by PensionBee found that a third (33%) of UK savers felt schemes should only be obliged to invest in UK assets if these investments lead to proven performance gains.
The previous government introduced plans under the Mansion House Compact to increase investment into UK “productive finance”, particularly from defined contribution (DC) schemes. The new government has continued this drive with several initiatives aimed at boosting private markets investment.
PensionBee polled 1,000 UK adults and found that nearly a quarter (24%) disagreed with mandatory UK investment and felt schemes should be free to invest wherever the best returns could be achieved.
Becky O’Connor, director of public affairs at PensionBee, said: “The new government has big plans for pensions and how they are invested and it’s important it delivers on claims that the changes will be in the financial interests of pension savers and also do not complicate pensions further.
“Proposals to invest more in the UK, to automatically consolidate smaller pots and to increase workplace contributions could be well supported if it is clear that the measures benefit individual savers by increasing their retirement pot or by making managing pensions easier for people. If the plans don’t achieve these aims, they could backfire.”
More than three quarters (76%) of respondents supported the idea of changes to the UK pension system, such as automatically combining small pensions into one pot.
Support for higher contributions
PensionBee’s research also noted support for higher pension contributions – but with concerns about affordability.
Many in the industry have been lobbying for the government to enact legislation brought forward to expand the scope of auto-enrolment and raise the minimum level of contributions.
While respondents generally supported this idea, 45% expressed concerns about affordability. This concern was notably higher among women, with 54% indicating that they might struggle to meet increased contribution demands, compared to 46% of men.
Aon’s recent DC report, Five Steps to Better Workplace Pensions, found that 61% of employers said their top priority for their DC pension was ensuring good value for money.
Other top priorities included governance and oversight, as well as developing specific communication or engagement objectives. Both these were top priorities for 42% of those quizzed.
Jenny Swift, DC market specialist at Aon, said: “It is fantastic to see our survey respondents focusing more on value for money. It is also crucial to understand the connection between good value and good outcomes as shown here.
“In particular, member charges, while important to get right, have considerably less impact on retirement outcomes than savings levels and, importantly, investment returns. As such, understanding what your provider is doing in this regard and comparing with market alternatives is key to ensure [members] get the most from their scheme.”
Further reading
Aon survey raises concerns over workplace DC adequacy (5 August 2024)
Chancellor fires starting gun on Pensions Review (22 July 2024)
Schemes eager to back government’s infrastructure investment drive (30 April 2024)
WTW urges higher default contribution levels to boost saving (29 April 2024)
