An “alarming” 35 per cent of savers knew that their pension was invested in the stock market, while a third (33 per cent) believed it was not and a further 32 per cent were unsure, research from Hargreaves Lansdown has found.

The survey also revealed a gender gap in pension knowledge, as only 25 per cent of women knew that their pension was invested in the stock market, compared to 44 per cent of men.

Furthermore, awareness did not increase with age, as the research found that 35 per cent of 25-34 year olds knew their pension was invested in the stock market, compared to 33 per cent of 45-54 year olds.

The findings were highlighted as demonstration of a “fundamental misunderstanding” of what a pension is, with many people thinking that their contributions were being saved, rather than invested.

Hargreaves Lansdown senior pensions and retirement analyst, Helen Morrissey, commented: “Around one third of people know their pensions are invested in the stock-market.

"It’s an alarming figure, but it’s understandable, because we talk about saving, rather than investing, in a pension. It means people are confused into thinking their contributions are stored in some kind of bank account until retirement.

“This fundamental misunderstanding stops people from engaging with their pension planning.

"By being invested in the stock market, they can benefit from long-term returns that really boost their retirement savings. Knowing the impact these returns can have should encourage people to contribute more.

“They also have the power to decide where their contributions are invested and so can choose to invest in a way that suits their retirement plans, and also in line with their values.
This could be to invest in a more environmentally sustainable way for instance or to remove certain companies or industries from their investments.

“If we can tackle this fundamental misunderstanding of what a pension is then it could prove to be a powerful catalyst for engagement."

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