Many savers are oblivious to how their pensions work, a survey has suggested after finding ignorance on a number of key basic points.

Over one in five of the 1,500 19-87 year olds surveyed didn’t know that pensions were invested in the stock market and over a quarter were unaware of how much the state pension is over.

More than a quarter of under 34s think the state pension is worth over £10,000 a year.

The new research from The Share Centre suggested although pensions have been in the spotlight since new freedoms were introduced in April, there are knowledge gaps that still need to be addressed.

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Many of those surveyed were confused about how much they will receive from their state pension, with one in four (28%) admitting they didn’t know how much it is.

The younger generation were the most naive when it came to expectations, with 27% of under 34s over-estimating the state pension by £4,000 a year.

On the other hand, despite moves in the Autumn Statement to increase the State Pension, over half of those surveyed (57%) don’t even think it will still exist when they reach retirement.

Richard Stone, chief executive of The Share Centre, said: “It appears that not only are people in the dark when it comes to the workings of their pension, but when it comes to a state pension, many are massively over estimating this government funded safety net.

“A staggering one in five people are over estimating their state pension by £4,000 a year. That over estimate is likely encouraging a lack of urgency in younger people to start setting money aside for their future. Although those starting out in work are often challenged by other financial demands such as student debt, housing costs or starting families, just putting a small amount aside on a regular basis can help build a meaningful savings pot for retirement.

“As the new pension freedoms came into force earlier this year we do not believe investors are generally being rash and spending those savings irresponsibly. Indeed we have seen alternative savings products like equity ISAs becoming more popular.

“Since pensions freedom we have seen equity ISA inflow increase by 13% year on year and we expect to see more people shift focus from pensions to equity ISA in the future. This will enable them to drive further investment growth and income from those savings tax free and boost their state pension or other income which may not be delivering as much support as they had hoped.”