Only 16% of defined contribution (DC) savers are saving enough to maintain their standard of living in retirement according to Aon Hewitt.
The latest results of its Defined Contribution Member Survey 2016 showed a huge disconnect between what savers expect and the amount they actually save.
The study conducted across the UK in collaboration with YouGov included responses from over 2,000 members with fieldwork undertaken between 17 June and 24 June.
On average, Aon calculates that DC members are saving £1,400 per year too little into their pension pots. This represents an estimated £11.4bn DC savings gap per year.
If the results in the survey sample are extrapolated to the whole of the estimated UK DC scheme population of 8.1 million members, half would not have saved enough for the retirement they expect.
Aon Hewitt partner Lynda Whitney said: “The upcoming review into auto-enrolment (AE) provides the government with a timely opportunity to identify what has worked and what needs more attention.
“It will need to work with the pensions industry to improve member engagement and to reduce this savings gap so that employees can develop adequate pension pots – and therefore viable levels of future retirement income.”
In addition, the survey also found company pensions are still a main source of income when people retire, with almost two-thirds of respondents relying on them for income in retirement.
Workers, and especially younger members, maintain a high expectation that employers will provide guidance and advice about pension savings.
Six in 10 employees trust their employer’s guidance when considering where to save for a pension.
Aon Hewitt partner and head of DC Consulting Sophia Singleton added: “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.”
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