- Less than one in three DC savers know what level of income they will need to live on when they retire
- 54% of DC savers agree the information they receive is too complicated
Almost two thirds (57%) of Defined Contribution (DC) pension savers are not confident their pension will deliver an adequate retirement income for them, according to new research from Hymans Robertson.
While many are unsure of their target income, the actions they need to take now are also unclear. Nearly a quarter (23%) say that they do not know how much of their current monthly salary they will need to contribute to their DC pension in order to have an acceptable standard of living in retirement.
Lee Hollingworth, Partner at Hymans Robertson commented: “91% of private sector employees participate in defined contribution schemes but those saving into them are not confident about what they will get out.”
A lack of effective communication is hampering understanding and confidence in DC schemes. More than half (54%) of savers said the information they receive is too complicated and full of jargon they do not understand.
For this reason it is perhaps not surprising that 38% of people never get around to making proactive decisions about their pension. Indeed, 57% believe they would act if the information was clearer.
Lee Hollingworth, continues: “A step change is required in the way DC is delivered for savers as in its present form it’s not fit for purpose. The majority of those DC savers who took part in our research have taken a conscious decision to save for retirement and if these people are not engaged with their pension, it will be a huge struggle to engage the millions of people enrolled into a DC scheme through automatic enrolment.
“Current methods based on education to facilitate a ‘DIY’ approach are doomed to fail as the majority of savers are not well placed to manage their own plan and need stronger direction and supportive guidance.
“Member communications from Trustees and employers need to simply focus on the desired target, progress to date, required actions to stay on track and also the consequences of taking no action.
“By following this approach, both employers and Trustees can help members improve their level of pension at retirement, while also better meeting their respective strategic objectives and governance responsibilities.”
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