Around 12 million people have never reviewed their pension plans while a further 1.37 million have not carried out a pension review in the last five years, according to research by Barings Asset Management.
The research found of the 52% of people who have reviewed their pension plans, 41% could not remember if they had chosen the default investment option. Around 20% of people had chosen the default option, while 39% claim not to have done so.
Certain age groups are more likely to choose the default option for their pension scheme than others, the report says. Over a quarter of those in the 18–24 and 25–34 age groups chose the default investment option compared with 10% of those in the 55 and over age group.
While 54% of people were clear on the asset allocation of the default option, 33% were unclear and another 13% could not remember the detail of where their pension funds were invested.
Almost half of the people who have revised their pension plans have not been advised on the appropriate asset allocation for their age and life stage, and 39% of people did not know if they have the appropriate asset allocation to suit their circumstances.
The majority, 87%, believe people in defined contribution schemes do not have the appropriate asset allocation for their life stage.
Commenting on the research, Baring Asset Management’s chief investment officer, Michael Hughes, urges people to carefully consider the asset allocation of their pension portfolio on a regular basis to make sure it is in line with their age, lifestyle commitments and number of years to retirement.
He recommends individuals take a core / satellite approach to the asset allocation of their pension portfolio. The core part of the portfolio should include assets such as global equities and inflation linked bonds while the satellite portion should include assets to generate alpha in the portfolio.
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