Over a third (38 per cent) of defined contribution (DC) pension scheme members aged 50-65 are unaware of their tax-free pension allowance, a survey from Hymans Robertson has found.

The research found that a further 32 per cent believed, incorrectly, that they can withdraw their entire pensions pot without paying tax, whilst nearly a fifth (17 per cent) wrongly believe that they do not have to pay any tax on income from their pension.

Hymans Robertson partner, Kathryn Fleming, said that the results create a “worrying picture”, with a “toxic mix of a lack of pensions knowledge, a reprioritisation of finances throughout the pandemic and poor workplace support” creating an “ever-widening financial literacy gap”.

The “stark” findings were also highlighted as an “important reminder” to employers of the need to review the current support for their members as they face decisions about their pension, with Hymans Robertson urging employers to consider if they could offer more help.

Fleming continued: “It is clear that those at a stage when they should be knowledgeable about their pension choices still have huge misunderstandings. Decisions made in haste are likely to have far reaching consequences for this age group.

“Without a real change many are at risk of making grave financial errors as they approach retirement. With a limited timeframe to make this change the onus is on employers, under their guidance role, to help narrow this gap through a combination of education and workplace tools.

“It has been a year like no other, and the importance of financial education may have been deprioritised as employers sought to keep staff safe, adapt to working from home and reshaped their day to day roles.

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