Young savers are losing faith in state pension, with just 11 per cent of 25- to 34-year-olds predicting it to be their main source of income in retirement, a new survey has found.
Across the entire sample of 502 non-retired DC savers between the ages of 25 and 65, 49 per cent expect to rely on their pension as the main source of income, compared to 23 per cent who said the state pension.
Just 2 per cent of 25- to 34-year-olds expect to release equity from their home to provide funds.
Despite savers expecting to rely on their pension, 39 per cent don’t know what their private pension pot might be at retirement. The survey found 31 per cent of savers plan to keep their money invested once they reach retirement age, with only 4 per cent planning to spend their funds on large purchases such as a new car or a holiday.
The research also showed overwhelming demand for flexibility when it comes to deciding how to use the pensions savings, such as taking income, keeping it invested or buying an annuity, with 73 per cent saying this is important, while 64 per cent said they are interested in the performance of their funds and 57 per cent said it’s important for them to be able to compare the growth of their DC fund with others.
AB lead portfolio manager for multi-asset solutions David Hutchins says: “Tomorrow’s retirees recognise that the outcome of their DC savings will be a key factor in the quality of their retirement. As a result they expect comparability of performance for their pensions funds and are unwilling to be tied down as to when and how they can access their savings. Members are looking for clear facts and figures rather than longwinded statements on which to judge their provider.
“As millions more rely on their DC investments for retirement it is incumbent on the industry to step out of the shadows of changing government regulation and work harder to gain members’ trust. Put simply: an industry that has all too often become a byword for complexity, rigidity and opaqueness must change to provide investment solutions that are simple to understand, flexible to members needs and transparent about what they have and intend to deliver.“
