Pensions misery for millions

Millions of Britons expect their pensions to be worth less than they expected when they took the policies out. And more than eight out of ten Britons contributing to a pension, some 16.7m people, expect a shortfall in the value of their policies when they retire.

If people’s worst fears are realised, pensioners will be £159bn worse off. The headline figure sounds dramatic but reflects a growing gulf in the actual value of pension plans against the projected value when they first took them out.

On average, according to research commissioned by Brewin Dolphin, people are expecting a 30% deficit in their pension pot. Despite widespread expectations of a pension shortfall, however, over a quarter (27%) of Britons contributing to a pension have never reviewed their pension arrangements.

This figure rises to nearly a third (32%) among women and appears to reflect widespread distrust of pensions advisers.

Brewin Dolphin’s study shows that while most people believe their pensions will not deliver the expected amount, some three quarters (73%) of those questioned said they will not consider talking to a professional adviser to review their pension arrangements.

Charlotte Black of Brewin Dolphin said: ‘This survey shows that most people are now resigned to the fact that their pensions will not deliver the returns they had originally expected. But worryingly, many of these are not taking any action to address the problem and are sleepwalking into disaster. Particularly worrying is the large number of 18-24 year olds who are pessimistic about their pension fund returns.’

Brewin Dolphin’s research comes just months after it emerged that more than half Britain’s homeowners are relying on their property to help fund retirement as the pensions crisis escalates.

Figures from the Prudential showed that the average pension pot has a deficit of £70,000, which home owners will attempt to cover by downsizing to a smaller property when they retire.

The National Association of Pension Funds said late last year that nearly two thirds of public and private pension schemes claim they expect to encounter difficulties in meeting the cost of future payouts.

The NAPF survey found 71% of pension providers said the cost of maintaining a workplace pension had risen considerably over the past five years.

This article was first published on This Is Money on 6 July 2005.