One in Five (18%) Pension Holders Don’t Understand a Single Pension Term, According to New Research

For most people, pensions are one of the biggest financial commitments they’ll ever make. They determine when we can afford to retire, how much income we’ll have in later life, and the lifestyle we’ll be able to enjoy. But despite their importance, pensions remain clouded in jargon — and new research from Wealthify reveals the impact this has on understanding.

Wealthify surveyed 1,000 working-age pension holders across the UK to uncover how well people understand pension terms, how this affects their retirement planning, and how people feel about introducing pension education in schools and early adulthood. The findings point to a concerning gap in knowledge, with almost one in five pension holders (18%) admitting they don’t understand a single pension term.

Even the most recognised phrase, “pension pot”, is understood by fewer than half of people (44%). “Salary sacrifice” followed with 27%, “annuity” at 25% and “pensions dashboard” at 24%.

At the bottom of the list are acronyms such as “BSP” (2%), “AE” (3%), “MPAA” (3%) and “VfM” (3%), alongside terms like “decumulation” (4%) and “crystallised” (6%).

The research found that, on average, pension holders understand just 17% of full-word terms and 6% of acronyms.

This low level of understanding isn’t due to a lack of trying. Search data shows thousands of people turn to Google every month for answers. “ESG” (which stands for Environmental, Social, Governance) is the most Googled pension-related term, with 15,000 searches a month, yet only 7% of people surveyed say they know what it means. “Annuity” is searched 3,100 times a month but understood by just one in four (25%), while “volatility” receives 2,400 monthly searches but is understood by only 15%.

Despite dominating headlines in recent years, fewer than one in six people (15%) understand what “triple lock” means. Just 24% know what the upcoming “pensions dashboards” are, and only 6% recognise “megafund” — a key term in recent proposals to consolidate workplace pensions.

Jessie Kwok, Chief Investment Officer at Wealthify, comments: “Pensions are one of the most important financial products most of us will ever have, yet the language around them is often confusing and inaccessible. Our research shows that terms like ‘triple lock’, ‘drawdown’ and even ‘pensions dashboard’, phrases that feature regularly in headlines, are still poorly understood by most pension holders.

“If people don’t understand the basics, they are potentially more likely to delay contributions, overlook valuable allowances, or miss opportunities to make their savings work harder. But it isn’t that people don’t care, in fact, our research shows thousands are actively looking for explanations every month, but they’re not finding clear and simple answers they can trust.

“If we want people to feel confident about retirement planning, we, as an industry, have to be proactive in removing barriers rather than adding them. That means simplifying jargon and being transparent. Doing this will help people make informed decisions and give them the confidence to take control of their financial futures.”