More than half of UK savers think they are unable to save enough for a comfortable retirement, according to BlackRock’s latest DC Pulse Survey.
Alarmingly this figures rises to 100 per cent for those aged 65 or over – indicating that difficult financial position many older savers find themselves in.
The survey shows that contributions remain short of the levels required to meet the retirement savers want, with 49 per cent of participants saying they are not contributing enough.
Worryingly, the ‘magic number’ of 15 per cent of salary seems an impossible contribution target for many.
Only 35 per cent of respondents believe their contributions (including employer and tax contributions) need to equal or exceed 15 per cent to meet their retirement goals, and only 13 per cent currently make a combined contribution of 15 per cent or more to their primary workplace DC pension.
BlackRock’s view is that current retirement expectations are not achievable without changes to three key levers. This inclue:
- Level of contribution
- Retirement date
- Level of risk/return in the portfolio
The survey also shows that Covid-19 has had a significant impact on retirement saving. Over three quarters (76 per cent) of UK savers acknowledge they will have to be more careful about their financial future – with 51 per cent likely to review or reduce pension contributions and favour short-term saving and debt reduction / elimination, as a result of the ongoing pandemic.
Despite pension contributions falling lower down the agenda, the findings suggest participants’ focus will swing back to retirement saving in the near future. In 2020, 44 per cent see retirement saving as important, with this figure projected to rise to 49 per cent by 2025.
BlackRock head of UK institutional defined contributions Alex Cave says: “Our research clearly evidences that many people are struggling with matching expected retirement lifestyle with what will be reality.
“Our view continues to be that ensuring the right level of portfolio risk /return, and appropriate levels of contributions of at least 15 per cent of salary over time, are critical to ensuring the type of lifestyle savers expect in retirement.
“In the current environment, people are understandably having to prioritise short-term financial pressures over longer-term retirement ambitions. Still, we believe that being invested – and staying invested over the long-term – enables compound interest to work for savers throughout their working lives and allows their capital to work much harder for them.
“It is imperative to stress the need to stay committed to pensions through these months of uncertainty, particularly in light of the potential ‘lower forever’ rate environment for savers.
“We are reassured by our research finding that savers’ focus on their pension pots will likely become a post-pandemic priority – with nearly half of respondents considering retirement saving important by 2025.”