On the go: Almost 90 per cent of defined contribution scheme members expect a shortfall in retirement income based on current provision, while almost a quarter of people think they will never be able to retire, according to the latest edition of Aon’s DC member survey.
The survey, carried out in collaboration with YouGov and which polled 2,002 individuals, revealed that 87 per cent believe they are not saving enough to avoid a retirement shortfall. The 17 per cent of respondents who think they will never be able to retire marks a significant increase over the 2018 figure, which was one in seven.
The research also concluded that more than a third (36 per cent) of people expect to work beyond the age of 68, while only 37 per cent believe they are saving enough to meet their long-term needs.
Almost three-quarters of respondents (71 per cent) reported not having worked out a goal for how much they need to save if they are to fully retire.
Speaking at an event to launch the survey’s findings, Ben Roe, senior partner and head of DC at Aon, said the responses show there is a clear need and demand for employers to do more to offer financial help and retirement support to members.
A meagre 15 per cent of respondents said their employer offers a “very good” level of financial support, while double that proportion (30 per cent) said their employer offers no such support at all.
Sixteen per cent reported not knowing what support (if any) was available, suggesting a need for improved communication by schemes and employers.
Despite 38 per cent of respondents reporting having their employment status directly impacted by the Covid-19 pandemic and the government’s lockdown policy, only seven per cent reported having checked how their pension investments had fared throughout 2020. Just eight per cent said they plan to do so over the next 12 months.
Jo Sharples, Aon partner and head of DC Investment proposition, argued that this small figure is evidence of “how vital it is for a DC pension scheme’s default to take care of investments on behalf of members”.
She added that the same is true of environmental, social and governance-oriented funds. Despite their growing popularity — given a choice between an ESG and a non-ESG fund, savers tended to pick the former — only four per cent of respondents said they have checked whether they are comfortable with their scheme’s investments from an ESG standpoint.
“This year’s Aon DC member research highlights that we are experiencing a fundamental shift in the way that people move from the world of work into retirement,” Mr Roe said.
“This is no longer a one-off event at a specific age, but increasingly a phased move taking place at ever older ages — and presenting new challenges.”
Accessing pension savings is likely to be the biggest financial risk faced by many DC savers, as “one bad decision could wipe out many years of careful saving and even a slightly suboptimal choice could cost thousands over the duration of their retirement”, Mr Roe continued.
“All this highlights that employers need to do more to support employees by helping them to save for the future during their active years, enabling them to build adequate pension pots and helping them to decide how to manage savings when they reach retirement age. The alternative will be an ever-increasing number of employees who are unable to retire fully from work.”
