Two-fifths (44%) of respondents believe they are not on track for retirement, according to research by global investment management business BlackRock.
Its 2018 DC pulse survey, which canvassed the opinions of 1,000 UK employees aged between 25 and 69 who have at least one defined contribution (DC) pension, also found that only 28% of respondents feel they are on track for retirement.
Just under half (48%) of respondents think they need to increase their pension contributions, while 47% feel they need to save more into other savings and investments. Around 36% of respondents, on the other hand, believe they simply need to tighten the purse strings.
Over a third (37%) of respondents prioritise good returns when looking at their pension scheme design, compared to 21% who view increased contributions as a priority, 17% who want the tools to stay up-to-date and 13% who cite little involvement from them as a priority. Only 11% state a very cost-effective pension as a priority for their pension scheme design.
Around 41% of respondents believe contributing to a pension is the single best way to prepare for retirement, compared to 43% who think that paying off their mortgage is the best preparatory method.
Approximately 75% of respondents think they will be relying on the state pension as their source of retirement income, while around 63% believe they will be relying on savings and investments. Just over 50% of respondents feel their retirement income will come from current or former DC arrangements, compared to an estimated 38% who think they will be using current or former defined benefit (DB) pension pots to fund their retirement.
The majority (80%) of respondents aged between 35 and 44, and a further 80% of employees aged between 25 and 43, believe now is a good time to be putting money aside into a pension, compared to 46% who are aged between 65 and 69. Around a quarter (26%) feel they will contribute into their pension once they have paid off all of their debts.
More than half (57%) of respondents already contribute 8% into their pension, ahead of April 2019’s auto-enrolment minimum contribution increase. This compares to 12% who feel they cannot pay this much into their pension. Over a third (35%) of respondents would consider increasing their pension contribution to maximise employer matching; however, 27% cannot afford to increase their current contributions. A further third (33%) do not feel they could contribute to their pension if the mandatory contribution amount increased to 15%. Despite this, 26% already contribute this higher amount, 16% feel they could easily contribute 15% into their pension and 25% think they could probably manage.
Claire Felgate (pictured), head of UK DC at BlackRock, said: “Ideally, savers should be looking to save 15% of their salary each month as a general ‘rule of thumb’. This may seem like a big number, but auto-escalation techniques and increases over time through pay rises can make the journey more manageable. Clearly, for those starting later in life, the increases would need to be higher. Hopefully some of these pre-retirees are fortunate enough to have also saved in a [DB] pension scheme for many years, but the message for many really is ‘you can’t save for your future, in the future’.
“I generally suggest a few simple things to my friends and family: if you don’t have a pension, explore getting one, there are often tax benefits! If you do have a pension, work out if you are contributing enough, using 15% as a rule of thumb. If you aren’t putting away at least 15% then look at ways to make small increases over time like committing to save more from your next pay raise; it all adds up and your future you will be very grateful!”