Whilst more than half (53 per cent) of Brits claim to be knowledgeable about pensions, the majority cannot identify the different types of pension scheme correctly, research from Aviva has revealed.

Aviva's survey found that just over a third (35 per cent) of savers were able correctly identify what a defined benefit (DB) pension is, while 34 per cent knew what a defined contribution scheme (DC) was.

In addition to this, 20 per cent were unaware what type of pension they have, while a further 20 per cent were unaware how many pensions they have, and 16 per cent of people said they don't know what a workplace pension is at all.

Younger savers were more confident in their knowledge, with 76 per cent of Brits aged 25–34 agreeing that they were sure they knew what they needed to about pensions.

However, this confidence was again slightly misleading, as less than half (44 per cent) of this age group were able to correctly identify the characteristics of a DB pension, while 45 per cent know the features of a DC scheme.

In contrast, while 64 per cent of men said they were knowledgeable about pensions (versus 43 per cent of women), accuracy around the specifics was more balanced with 47 per cent of men and 45 per cent of women correctly describing what a workplace pension is.

Broader pension knowledge was also found to be lacking, however, as just over a third (34 per cent) of respondents correctly identified that there is no longer a default retirement age in the UK, whilst just 20 per cent were aware of the 2015 pension freedoms, and knew that savers with a DC pension can access their pension from age 55.

Many respondents also over or underestimated when someone will start receiving their state pension, with just over one in six (17 per cent) correctly stating that it is currently 66 years old.

Tax misunderstandings were also found, as Aviva revealed that more than half (57 per cent) of Brits did not know that the government contributes to pensions in the form of tax relief and less than a tenth (7 per cent) knew that the minimum level of tax relief starts at 20 per cent.

In addition to this, while a quarter (25 per cent) of people with a pension have increased their contributions, nearly one in five (18 per cent) of those who haven’t changed their contribution levels said they were unaware they could.

This was not the only area that savers' lack of pension knowledge could be impacting their outcomes, as although 19 per cent of people actively manage their pension investments, more than half (55 per cent) said they don’t know how their pension is invested.

What's more, the majority (81 per cent) have never changed their investment strategy, and a quarter of those say it’s because they don’t know enough, or didn’t realise they could.

Aviva wealth, retirement and insurance CEO, Doug Brown, highlighted the findings as evidence that, while confidence is high, people’s knowledge and understanding of pensions doesn’t necessarily match that self-assurance, arguing that financial literacy is the "cornerstone" of financial wellbeing.

"By empowering people with better pension knowledge and the tools they need, we aim to help them make informed decisions about their financial futures to help them get ready for retirement," he continued.

“A good grasp of pension literacy can help you to maximise your benefits by knowing when and how to claim your pensions, understand tax implications, and make the most of your employer contributions.

"Having a well-informed approach to retirement planning, including how to balance spending, saving and investing, means that you could have sufficient savings put aside to maintain your desired lifestyle in retirement.”

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