Two-thirds of DC pension savers are unprepared

More than two thirds (69%) of savers in defined contribution (DC) pension schemes are ‘reluctant’ or ‘unprepared’

While 79% are currently participating in their employee’s DC pension scheme, only 14% are confident they will enjoy a comfortable retirement, according to the survey Inside the Minds of UK Participants from investment management firm AllianceBernstein, which surveyed 435 UK adults in full-time employment. 

More than half (56%) feared they would be faced with a poorer retirement, a concern which was far more prevalent among older savers than younger ones.

Other key findings from the survey include:

  • Of the 69% who are accidental investors and lack confidence in their financial situation, more than 90% will either delegate investment decisions or be guided by others.
  • While 31% of savers are happy with their current financial situation, more than half of those will seek advice, probably from a professional financial adviser.
  • Only 3% of DC savers are both happy with their current financial situation and ready to make the investment decisions necessary to secure it.
  • Being debt free (51%), living comfortably (47%) and having money for an emergency (44%) were the most frequently cited reasons for saving.

David Hutchins, AllianceBernstein’s head of UK DC research and investment design, said: “The fact nearly 80% of survey respondents are participating in their employer’s DC pension scheme is encouraging. It suggests where an employer provides a meaningful pension arrangement people are aware of the importance of saving for their retirement.

“This bodes well for the implementation of auto-enrolment and possibly Nest, the new national pension savings scheme due to start in 2012. But, at the same time, it is clear the vast majority of DC savers are either unable or unwilling to make critical investment choices for themselves. 

“Nearly three-quarters of people do not enjoy planning or thinking about financial matters. For all the efforts made by pension providers and policy makers in devising new ways to communicate with savers, the simple fact is that people are not interested in the nitty gritty of investing.

“A more useful focus for the industry, therefore, should be on developing appropriate investment strategies for the vast majority of people who want to save, but are not interested in managing their own investments.

“The design of DC schemes, and particularly the default funds in which most DC members end up, should first and foremost reflect the characteristics of the ‘accidental investor’ majority.”

Read more articles on occupational pensions.