Future generations are set to face much weightier retirement decisions in the defined contribution pension savings landscape, Royal London has said.

According to new research undertaken by Milliman for Royal London, the rise of DC saving has created a world of “decision citizens” who have to make choices throughout their working life and into retirement regarding their pension savings.

The report emphasised the role of impartial advice in supporting complex decisions “will be crucial”.

Looking at four different groups of people who are ‘comfortable’, ‘managing’, ‘squeezed’ or ‘have limited choices’ aged 30, 40, 50 and 60, over two thirds were found to have to significantly reduce their standard of living in retirement. While, nearly half are reliant on the state pension to fund some of their ‘essential’ spending.

Individual case studies also highlighted that the impact of different decisions throughout key life stages. A family aged 30 who opt out of auto-enrolment when contributions rise to 5 per cent in 2019 and do not result saving until they are 55 would see a 69 per cent fall in their private pension in retirement. Whereas, a family who review their pension contribution rate on starting a new job offering a generous “matching” contribution would see a £1,600 increase in annual employee contributions lead to an extra £6,900 in retirement income.

In addition, it was noted that regular modest increases in contribution rates throughout working life produce a much greater savings uplift than a large increase in later life.

The self-employed who are never exposed to the scope of auto-enrolment could end up around £3,800 per year worse off in retirement than an employee with the same pre-retirement income, the analysis found.

Royal London strategic insight manager Ronnie Morgan, said: “The world of DC pensions is a world of ‘decision citizens’ – people whose choices during their working life can profoundly affect their quality of life in retirement. Regularly reviewing workplace pension contributions and increasing them ‘little and often’ is a far better strategy than hoping to make up for a lifetime of under-saving close to retirement.

“This research shows very clearly how many people could be heading for disappointment in retirement unless they get the advice and guidance that they need to make good financial decisions throughout their working lives.”

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