Young workers risk being overconfident in their pension savings, which could cost them in the long run, according to research from BlackRock.
In its new DC Pulse survey, BlackRock found that 39 per cent of those aged 25-34 are confident that their retirement savings are “on track”.
However, many young savers have fallen “below the savings rate required” to meet their long-term saving goals. The survey found that 45 per cent of young savers and their employers should be contributing 15 per cent or more into their defined contribution schemes, although only 29 per cent are doing so.
Around 44 per cent said that they are putting off saving or investing for retirement as it “seems silly to focus on something so far away”.
BlackRock head of UK DC, Claire Felgate commented: “Auto-enrolment has played a very important role in reiterating the importance of planning for later stages of life, by nudging people to start saving through a pension scheme at work.
“According to the Office for National Statistics (ONS), more than 9.5 million people have now been enrolled into a pension scheme, but we worry that for younger savers, it’s given them a false sense of security.”
Comparatively, 18 per cent of 45-54 year olds and 31 per cent of 55-64 year olds are confident that their retirement savings are on track.
Furthermore, 71 per cent of those aged 25-34 said that they would prioritise putting money into a “rainy day” fund, compared to 52 per cent saying that they would prioritise putting money into retirement savings.
More than half (52 per cent) said that are more likely to spend money on day-to-day luxuries that they can’t really afford. Only 2 per cent said that, if they were paid an extra £200 per month, they would put it into their pension.
Additionally, 35 per cent of young workers think that they have a DB pension scheme with their current employer, when ONS figures put it closer to 20 per cent of those younger than 29.
Their knowledge of their DC schemes is also concerning, as just 14 per cent know exactly how much money is in their current DC pension pot.
Felgate concluded: “Given the level of trust people generally place with their workplace, employers can play a massive role in helping young savers to contribute more to their pension and help bridge the gap between what they are actually putting away and what they would ideally like to put away.”