Over half of savers likely to review or cut pension contributions in favour of 'rainy day' savings

Over half (51 per cent) of savers are likely to review or reduce pension contributions in a bid to prioritise ‘rainy day’ savings amid the pandemic, according to the latest BlackRock DC Pulse Survey.

This is despite 51 per cent of savers stating that they are not on track to live the kind of lifestyle they want in retirement, and 100 per cent of those aged over 65 feeling that they have fallen behind on their retirement saving.

Furthermore, 49 per cent of savers said they were not contributing enough, with BlackRock warning that the ‘magic number’ of 15 per cent of salary contributions seems an "impossible target" for many.

Indeed, just over a third (35 per cent) of respondents thought that contributions need to equal or exceed 15 per cent to meet retirement goals, and only 13 per cent are currently making a combined contribution of 15 per cent or more.

However, the pandemic has also influenced broader attitudes to saving, with 76 per cent of respondents also acknowledging that they will have to be more careful about their financial future.

Furthermore, despite pension contributions falling down the agenda, the findings have suggested that participants’ focus will swing back to retirement planning in future, with 44 per cent seeing retirement savings as important, a figure which is projected to rise to 49 per cent by 2025.

BlackRock head of UK institutional DC, Alex Cave, highlighted the findings as clear evidence that many people are struggling with matching expected retirement lifestyle with what will be reality.

He stated: “Our view continues to be that ensuring the right level of portfolio risk/return, and appropriate levels of contributions of at least 15 per cent of salary over time, are critical to ensuring the type of lifestyle savers expect in retirement.

“In the current environment, people are understandably having to prioritise short-term financial pressures over longer-term retirement ambitions.

“Still, we believe that being invested – and staying invested over the long-term – enables compound interest to work for savers throughout their working lives and allows their capital to work much harder for them."

Cave concluded: “It is imperative to stress the need to stay committed to pensions through these months of uncertainty, particularly in light of the potential ‘lower forever’ rate environment for savers.

“We are reassured by our research finding that savers’ focus on their pension pots will likely become a post-pandemic priority – with nearly half of respondents considering retirement saving important by 2025.”

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