The survey shows that contributions remain short of the levels required to meet what retirement savers want, with 49% of participants saying they are not contributing enough. Worryingly, the ‘magic number’ of 15% of salary contributions seems an impossible target for many.
Only 35% of respondents believe their contributions (including employer and tax contributions) need to equal or exceed 15% to meet their retirement goals, and only 13% currently make a combined contribution of 15% 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
• 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%) of UK savers acknowledge they will have to be more careful about their financial future – with 51% 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 that participants’ focus will swing back to retirement saving in the near future. In 2020, 44% see retirement saving as important, with this figure projected to rise to 49% by 2025.
Commenting on the findings, Alex Cave, Head of UK Institutional Defined Contributions at BlackRock, said: “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% 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.”
DC Pulse Survey
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