One in four 18–24-year-olds with a workplace pension think that their contributions end up in a bank account, according to research by Royal London.
The survey of 6,003 consumers carried out by Opinium, found that less than a third (28 per cent) of young adults are aware that pension contributions are invested by their pension provider.
Of those surveyed, 4,500 had one or more workplace pensions, and discovered that, across all age groups, almost one in 10 (8 per cent) think their pension money goes straight into a bank account.
More than a fifth (22 per cent) of people did not know what happened to their pension contributions once they were made.
However, there was a significant gender divide, with 15 per cent of men but almost a third of women (30 per cent) giving this answer.
Meanwhile, two fifths (40 per cent) of people thought that pension contributions were invested in funds chosen by their pension provider and 15 per cent thought they were invested in funds either they have actively chosen or that are selected by their financial adviser.
Sarah Pennells, consumer finance specialist at Royal London, said: “Our research shows that there is a real divide in attitude to pensions between those who are interested in their pensions and those who either don’t have a pension at all or have a pension that they’re not actively monitoring.
“It’s heartening to see the majority of people know that their pension funds are invested but it was a surprise to see that a quarter of young adults thought that the money that left their pay packets every month ended up in a bank account until they needed it.
“There is definitely more to do to get people actively engaged with their pensions and taking an interest in where that is being invested.”
The research also showed that over half of respondents with a workplace pension were unsure whether they were saving enough to have the means to live comfortably in their retirement, with 37 per cent saying they felt they should be saving more, and 22 per cent admitting they don’t know if they were saving enough.
“Retirement can seem like a long way away, until suddenly it’s around the corner," Pennells said.
“There are lots of demands on people’s time and money, but if you ignore your pension and don’t think about what you’d need for a good standard of living when you stop work, your retirement may look very different to the lifestyle you’d like.”
Additionally, the research also found that men are more likely to say they’re saving enough for their retirement - with almost half of men (47 per cent) saying this compared to around a third of women (34 per cent).
Clare Moffat, pensions expert at Royal London, said: “Auto enrolment has been a great success in getting more and more people saving for retirement but, for most, the amount being saved won’t give them the retirement they want.
