Half of people think they cannot afford the retirement they want, according to new research.
More people are worried they will not be able to save enough for the comfortable retirement they want than two years ago, according to research.
BlackRock’s 2020 DC Pulse Survey found over half (51%) of UK savers in defined contribution pension schemes are far from confident in their financial futures.
This is a worsening of the situation from 2018, when only 44% said they were concerned their retirement plans were not on track.
Anxiety about a frugal retirement is highest among those closest to giving up work. The survey found all of those aged over 65 reported feeling their current level of pension savings was too low.
Financial experts think most savers need to put away around 15% of their salary into a pension scheme every month (including employer’s contributions) to build a comfortable retirement pot – the so-called ‘magic number’.
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But findings of the BlackRock survey suggest this is 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 pension.
BlackRock’s view is that current retirement expectations are not possible without changes to savers’ level of contributions, retirement dates, and the level of risk/return in their portfolios.
Alex Cave, head of UK institutional defined contributions at BlackRock, said:
“Our research clearly evidences many people are struggling with matching expected retirement lifestyle with what will be reality.”
Covid-19 has also re-focused priorities. More than half (51%) of those questioned said they are likely to review or reduce pension contributions in a bid to prioritise “rainy day” savings and debt repayment amid the ongoing pandemic.
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More than three quarters (76%) of UK savers acknowledge they will have to be more careful about their financial future.
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.
Cave added: “People are understandably having to prioritise short-term financial pressures, but staying invested over the long-term enables compound interest to work for savers 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.”
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