The majority (95%) of young and middle-aged adults do not feel confident they are on track to reach their retirement goals and are looking to their employers for help, according to research by State Street Global Advisors (SSGA).
Its UK Defined contribution research, which surveyed more than 1,000 respondents who participate in their employer-sponsored defined contribution (DC) pension, found that 45% of those who said they are not confident about their pension provision blame poor schemes, insufficient time and a lack of existing savings.
Nearly 70% of young respondents, aged between 22 and 36, said they contribute less than 6% to their DC pension annually.
More than 80% of young respondents have no plans to change the amount they contribute to workplace pension arrangements in the next year.
On average, these young respondents expect to retire at age 63.
The research also found:
- Young people have the lowest level of understanding about how their savings are invested. Just over a quarter (27%) claim to have an understanding of their default fund compared to 54% across all age groups.
- Nearly 60% of younger respondents are more likely to invest in property and increase personal investments in order to generate an income for retirement.
- More than 50% of all respondents would prefer to invest in independent savings accounts (Isas) in order to generate retirement income.
- Nearly one in five households with young and middle-aged adults currently have less than £5,000 saved for their retirement.
Nigel Aston (pictured), managing director and head of UK DC at SSGA, said, “One year into auto-enrolment, it is clear that a substantial number of people are looking for help to reach retirement readiness.
“Currently, Generation Y sees little value in investing in a workplace pension, and is looking elsewhere to secure a retirement income.
“We need to learn from the investment products that are attracting Generation Y’s attention. Many of them communicate the benefits and ease of investing, and we need to help [employers] pass on the same messages about DC.
“This research indicates that employers occupy a position of real trust with their staff; they can leverage that relationship to drive better workplace savings outcomes.
“These figures should galvanise the pensions industry into building the next generation of default funds. Unless we build better solutions and work in lock-step with employers to increase engagement in workplace pensions, auto-enrolment will have failed.”
