Few are likely to have enough savings to retire comfortably
As WEALTH at work, a leading provider of financial education in the workplace, supported by guidance and advice, blogs with Reward about the different retirement income options now available to retirees, worrying statistics are emerging about the savings people are making into their retirement pots.
Aon’s Defined Contribution Member Survey 2016 shows that four out of five pension scheme members are not saving enough, with only 16% contributing enough to maintain their standard of living in retirement.
Moreover, the research suggests that in the UK around one in four (2.75 million) DC scheme members do not know what retirement income they are expecting to receive, and so are unlikely to be on target.
With over half (51%) saying they value flexibility – especially in drawdown – and 42% still expecting to have retired by age 65, it is now key to ensure that they are getting the financial education they need to make contributions appropriate to their retirement needs, as well as making the right choices in terms of their final pension vehicle.
The responsibility for this is sitting more and more on the shoulders of employers: many savers expect their employer to provide guidance and advice about pension savings – and nearly two thirds (60%) trust their employer’s guidance on where they should be saving for retirement.
Sophia Singleton, partner and head of DC Consulting at Aon Hewitt, comments on the research: “It is crucial for employers and trustees to have the right structures in place to make retirement saving easier to understand, which would encourage employees to contribute more.”
“We still see that members look to their employers for guidance. The trust that is placed in them when it comes to pension savings, means that there is a real responsibility to provide adequate and clear communications in order to improve member engagement and contribution levels.”
WEALTH at work has previously suggested that employers must actively consider their staff’s financial wellbeing, and ensure that they are offered various and appropriate saving vehicles in the workplace as well as providing education, guidance and advice around their retirement income options.
According to a poll* by WEALTH at work, only 18% of employers believe that their employees know how much they should be saving into their pension to get a good retirement income.
Jonathan Watts-Lay, Director, WEALTH at work, comments; “It is a worrying problem. Employees simply don’t understand how much they should be saving for retirement. It could lead to many individuals realising that they have not saved enough to meet their expectations in retirement, at a time when it’s too late to do anything about it.”
Reward and WEALTH at work are blogging about financial education, savings and retirement options. FOLLOW THE SERIES HERE