Less than a fifth (16%) of defined contribution (DC) pension scheme member respondents are saving enough into their pension to maintain their current standard of living in retirement, according to research by Aon.
The Defined contribution member survey 2016, which surveyed 2,004 UK adults who are members of a DC fund, also found that 62% of respondents rely on their workplace pension as one of their main sources of financial support in retirement.
The research also found:
- 37% of respondents are saving less than 5% of their annual salary into their DC pension fund.
- 48% of respondents are contributing between 5% and 10% of their salary into their DC pension scheme.
- 60% of respondents trust their employer’s guidance when considering where to save for a pension.
- 42% of respondents expect to retire by the age of 65, and 40% of millennial respondents expect to retire by 65.
- Between them, employees and employers are saving an average of 12.7% of their salaries into pension pots, compared to 15% in 2014.
Sophie Singleton (pictured), partner and head of DC consulting at Aon Hewitt, said: “Auto-enrolment has successfully increased participation in pension schemes, but the vital next step is to ensure that these new entrants save a sufficient amount for retirement. It is crucial for employers and trustees to have the right structures in place to make retirement saving easier to understand, which would encourage employees to contribute more.
“We still see that members look to their employers for guidance. The trust that is placed in them when it comes to pension savings, means that there is a real responsibility to provide adequate and clear communications in order to improve member engagement and contribution levels.”