Around four in 10 (43%) of defined contribution (DC) pension scheme members do not know how much of their monthly salary they should be saving into their workplace pension, according to research by BlackRock.
Its survey of 509 UK DC pension scheme members aged between 30 and 69 also found that 44% of respondents do not know what their current DC pension balance is, and only 11% of respondents are confident they can provide an accurate figure.
The research also found:
- 71% of respondents would like the government to introduce a compulsory contribution rate as a total percentage of their monthly salary to save into their DC pension.
- 45% of respondents want their workplace DC pension scheme design to focus on getting good investment returns, compared to 23% of respondents who would prefer their employer to provide simple to understand investment choices.
- 33% of respondents feel they are on track to achieve their desired lifestyle in retirement. Of those who believe they are currently not on track to achieve their retirement lifestyle goals, 47% think they need to save more, 43% believe the government will not support them in retirement, 40% cannot afford to save, and 27% are just saving the minimum amount required under auto-enrolment.
- 19% of respondents have never checked the value or performance of their DC pension pot from their current employer.
Claire Finn (pictured), head of UK DC pensions at BlackRock, said: “The introduction of auto-enrolment was a bold and much-needed step to promote a broader culture of saving in the UK. But it needs to go further. Brits are now largely accountable for their own retirement provision, and our survey shows that those saving into a workplace pension need greater guidance as to how much they need to save if they want to meet their needs in retirement. The increase in the contribution rate to [8%] in April 2019 is a step in the right direction but could be misinterpreted as the ‘magic number’. We need to help savers understand that even [8%] is unlikely to be enough for them to retire comfortably.
“One of the biggest surprise factors from our survey is the divergence in opinion between members and employers as to what constitutes good investment design. Employees are crying out for more guidance as to how much they need to be saving into their DC pension and they want their employer to focus on getting a good return on their hard-earned cash. This compares to schemes commonly prioritising keeping the underlying investments simple. We believe schemes should instead focus their simplicity on contribution rates, and prioritise an optimised default investment.”