Britain is sleepwalking into a pensions crisis as staggering numbers of people admit they haven’t got a clue how their retirement savings actually work.

New research lays bare the shocking scale of financial ignorance when it comes to pensions – with more than half of adults baffled by basic concepts such as tax relief, and one in five confessing they don’t even know what type of pension they have.

The findings, from Aviva, suggest the nation is heading towards a “pensions black hole” with millions at risk of falling short in old age, despite feeling confident they understand their finances.

In an astonishing disconnect between confidence and competence, 53% of adults claim to be knowledgeable about pensions, yet only a third could correctly identify the difference between a Defined Benefit and a Defined Contribution scheme – the two most common types of pension.

Even more worryingly, 57% had no idea that pension contributions are topped up by the government through tax relief, while just 7% knew the minimum level of tax relief is 20% – essentially free money from the Treasury going unnoticed.

And in a sign of how far financial awareness still has to go, 20% of people said they had no idea what kind of pension they actually hold – a figure that includes not just younger savers but those approaching retirement age.

Aviva's Doug Brown said the findings highlighted a “dangerous overconfidence” in the public’s understanding of retirement savings, warning: “A good grasp of pension literacy can help maximise your benefits... but these results show we have a long way to go.”

The report uncovered a gulf between self-belief and reality. Among 25-34 year olds – the group most confident in their pension knowledge – three-quarters claimed to know what they needed. Yet fewer than half could identify key features of even the most basic pension schemes.

Meanwhile, men were more likely to say they were pension-savvy than women (64% vs 43%), but when put to the test, both genders scored similarly when asked to explain how workplace pensions actually work.

Among the most alarming findings:

* Just 35% could explain what a Defined Benefit pension is – the traditional 'gold-plated' version based on salary and years of service.

* Only 34% could correctly describe a Defined Contribution scheme – the more common modern setup where payouts depend on investment performance.

* One in six didn’t even know what a workplace pension was.

* 81% of people had never changed how their pension is invested, with most admitting they didn’t realise they could.

Despite pensions being one of the largest financial assets most people will ever own, more than half (55%) don’t know how their savings are invested, and the vast majority have never reviewed or changed their investment strategy – leaving them exposed to poor returns and unnecessary risk.

Aviva’s research also found that a third of people don’t know how to access their pension pots, and only 15% have consolidated them – potentially leaving thousands in lost or forgotten schemes.

Brown added: “Pensions are not just something to think about at 60. The earlier you understand them, the better off you’ll be.”

Since 2015, people with Defined Contribution pensions have been able to access their savings from age 55, and yet just 20% of those surveyed knew this. Only 17% correctly stated the state pension age is now 66.

Financial experts have long warned that without urgent action, today’s lack of understanding could leave millions without enough to live on in retirement.

Critics say years of complex jargon, shifting rules, and a lack of education in schools have contributed to a system few truly grasp.

But the message is clear: Britain is running out of time to wake up to its pensions problem.

“For many, retirement is no longer a far-off dream but a fast-approaching reality,” said one pensions expert. “Yet too many are heading into it with their eyes shut.”