Workers are calling on the government to set a mandatory pension contribution rate in a drastic bid to help more people save for later life.
Seven in 10 Brits would like the government to introduce a compulsory contribution rate as a total percentage of their monthly salary into their defined contribution pension, according to a survey of over 500 UK DC pension scheme members aged 30 to 69.
The research, which was commissioned by BlackRock, comes five years on from the introduction of auto-enrolment, which sees all workers placed into a workplace pension scheme paying in a minimum to their retirement fund, but from which they can opt out at any time.
Claire Finn, head of UK DC pensions at BlackRock, said that although the increase in the auto-enrolment contribution rate to 8 per cent by April 2019 is a step in the right direction, the ideal rate of contribution should be set to around 15 per cent.
She said: “Brits are now largely accountable for their own retirement provision, and our survey shows that 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.
“The exact rate obviously depends on the age at which you start saving and how much you earn, but we believe around 15 per cent is a good figure.
“We understand that the reality that bills and life circumstances, such as buying a house, or having children means contributions can vary.
"Obviously, one size does not fit all and there should be flexibility for people to pay less due to their own personal circumstances. But contributing 15 per cent is a good benchmark.”
Four in 10 respondents admitted to not knowing how much of their monthly salary they should save into their workplace pension, according to the reseach.
As it stands, a 30-year-old, currently earning £30,000 and wanting roughly two thirds of their salary in retirement would need to contribute 10 per cent of their monthly salary to their workplace pension.
However, if the same person waited until age 35, their contributions would need to be 14 per cent to achieve the same goal. If they delayed making contributions until age 40, they would need to be putting aside 19 per cent of their salary.
Unfortunately, the data also showed that 47 per cent of workers polled believe they are currently not on track and they need to save more, while 43 per cent do not think the state will support them in retirement. Worryingly, 40 per cent cannot even afford to save.
The survey also found a disconnect between what members and their employers believe should be the main focus in pension scheme design.
Many schemes focus on keeping their investments simple, including the default fund, which most members end up in.
But almost half of participants want their employer to focus on getting good investment returns, compared to less than a quarter who would rather their employer prioritised ‘simple-to-understand’ investment choices.