Although 42 million Americans participate in corporate pension plans, there is a widespread lack of awareness about how those plans work, according to a recent survey.
Seventy-one per cent of the 500 American employees surveyed said they do not have detailed knowledge of how their plans operate, according to Fidelity Investments.
Nearly one-third (31 per cent) of those surveyed said they don´t know their plan’s vesting schedule, 40 per cent don’t know what their payment options will be upon retirement or when leaving their company and about one-quarter (27 per cent) don’t know at what age they can begin to receive payments, found the survey.
"Corporate pension plans remain a critical component of retirement income for millions of Americans," said Wendy Foster, senior vice-president in Fidelity’s defined benefit business. "Our research highlights an opportunity for companies to better educate their employees about the value of employer-sponsored pension plans.”
The majority of those surveyed (61 per cent) said they have never inquired about how much money they will receive upon retirement. When asked to explain their passive approach to determining the monetary value of their pensions, 43 per cent said they rely on their employer to provide the information when necessary and more than one in four (29 per cent) said they lack knowledge about the plan and/or they do not know whom to ask for information.
On average, participants expect their pension benefits to supply almost one-quarter of their retirement income, the survey found. Most (56 per cent) said they will rely on their pension payouts to cover living expenses during their retirement years, rather than as extra money for expenses like travel or hobbies.
The breakdown of expected sources of income in retirement, on average, is as follows: pensions (23 per cent), defined contribution plans (27 per cent), social security (26 per cent) and savings/other (24 per cent).
The majority of the pension plan participants surveyed (56 per cent) said they expect to receive annuitized payments from their plans when they retire.
Just 10 per cent plan to take lump sum payments and nine per cent expect a combination of both a lump sum payment and a form of annuity.
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