More than two thirds (70%) of Brits would like the government to introduce a compulsory contribution rate as a total percentage of their monthly salary to put into their defined contribution (DC) salary, a survey by BlackRock has found.
Auto-enrolment minimum contributions are set to increase to 8% in April 2019 but BlackRock warned this could create “a false sense of security” among workplace pension savers about how much they need to save for retirement.
As an example, the asset management group said a 30-year-old currently earning £30,000 who wanted around two-thirds (£21,000) of their salary in retirement would need to contribute 10% of their monthly salary to their workplace pension.
If the same person waited until age 35, however, their contributions would need to be 14% to achieve the same goal. If they delayed making contributions until age 40 they would need to be putting aside 19% of their salary.
BlackRock interviewed 509 DC members aged 30 to 69 and found just one-third thought they were on track to achieve their desired lifestyle in retirement.
Almost half (47%) said they needed to save more while two-fifths of respondents admitted they did not know how much of their monthly salary they should save into their workplace pension.
Blackrock head of UK DC pensions Claire Finn said: “Brits are now largely accountable for their own retirement provision and our survey shows those saving into a workplace pension need greater guidance as to how much they need to save if they want to meet their needs in retirement.
‘Step in the right direction’
“The increase in the contribution rate to 8% in April 2019 is a step in the right direction but could be misinterpreted as the ‘magic number’. We need to help savers understand even 8% is unlikely to be enough for them to retire comfortably.”
Scottish Widows has previously called for a 12% minimum contribution by 2020, while Aviva said it wanted 12.5% by 2028, arguing raising the minimum contribution levels would be a positive step towards helping more people save for retirement.
In August, Ipsos Mori found almost four-fifths (79%) of those with workplace pensions would welcome increasing their savings alongside employer contributions.
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