Up your DC game

In partnership with MSCI

Capital at risk. This information should not be relied upon as investment advice, or a recommendation regarding any products, strategies. The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

In July 2020 we ran our BlackRock DC Pulse Survey of 1,000 UK defined contribution (DC) members. This year we focused on:

  • Confidence in retirement planning and ambitions
  • The relative importance of retirement savings in participants’ financial planning
  • Investment arrangements; engagement with investing; and attitudes to control and risk
  • Attitudes towards sustainabiliy
  • The impact of COVID

Source: BlackRock DC Pulse 2020, 1,000 UK DC participants. Survey ran through July 2020.

UK participants far from confident in their financial futures.

Confidence in financial futures

For illustrative purposes only.

100% of those over the age of 65 felt they are not on track with their retirement savings because they started to save too late. Engagement can prevent this for future generations.

Concerns over retirement lifestyle

Concerns over retirement savings

For illustrative purposes only.

In 2020, 51% believe they are simply unable to save sufficiently to achieve the retirement they want compared to 44% in 2018 (BlackRock, May 2018).

Findings from the ILC The Global Savings Gap (June, 2017) predicted that UK adults unable to save sufficiently for retirement could face a savings gap in excess of 20% of earnings, increases in default contribution notwithstanding. 

  • Millenials Gen X Pre-retirement
    Target basic retirement income* £19K £18K £15K
    Target ideal retirement income** £30K £24K £20K

    For illustrative purposes only.
    *To cover the basics (Median), **To live the lifestyle they want (Median)

  • Target annual income

    For illustrative purposes only.
    ***Current income as % of targets (Median)


Current retirement expectations are not achievable without changes to three levers;

  1. Level of contribution
  2. Retirement date
  3. Level of risk/return in the portfolio

At the beginning of September 2020 the government confirmed that the private pension age would rise to 57 (from 55) in 2028, reflecting trends in longevity and encouraging people to stay at work to protect and provide for later life.

But this does not just sit with the employee. Employers and the government need to determine how they are to increase contribution levels to improve confidence and security.

Gender disparity: Too big to ignore

Gender disparity: Average salary differential

*ONS Gender Pay Gap in the UK: December 2019

For illustraive purposes only. 

Together with other issues impacting financial independence (maternity being the most significant), disparities in compensation mean women are MUCH less likely to be confident of a comfortable retirement. 51% of women believe they are unable to save enough compared to the average man at 36%.

The gender pay gap probably plays a large part in this, as we see a large average earnings difference between genders but priorities also play a part. For women the number one priority is paying off debt, for men it is saving for retirement.



of women prioritise paying off debt compared to 19% of men
of men prioritise saving for retirement compared to 17% of women

It’s my employers responsibility!

It’s clear that employees feel the employer is responsible for their pension and they place a lot of trust in them.

Employees trust in their employerFor illustrative purposes only.

The onus is on employers to assume responsibility for the decisions participants feel – or are – ill-equipped to make.

Research suggests TRUST in employers significantly outstrips that in NGOs (48%), business (47%), government (36%) and media (35%).1

There is a strong sense that employers are better equipped to effect change at a micro level than are other parties whose influence acts on the bigger stage.

12020 Edelman Trust Barometer

Participants are typically hands-off and often relatively disengaged

Only one in four participants claim to be comfortable ‘managing’ their pensions.

Managing pensionsFor illustrative purposes only.

'I don’t understand enough about investments in my pension to be confident in managing those myself’

79% agreed with this! 43% of women who answered this said they strongly agree. Compared to 30% of men.
quotation marks

Contributions remain short of levels

Contributions remain short of levelsFor illustrative purposes only.

The magic number - 15% of salary2 – seems worlds away for many

believe their contributions (inc. employer and tax contributions) should equal or exceed 15%
currently make a combined contribution of 15% or more to their primary workplace DC pension

For illustrative purposes only.
2Estimated minimum contribution to meet realistic income in retirement, assuming replacement ratio of 45-50%

Twice as many professionals and senior managers are able to make contributions in excess of 15% than those non-managerial or ‘blue collar’ roles.

While many lower-paid workers would expect to rely on the State to a greater degree than those in higher-paid positions, nevertheless many may fall short.

Takeaway: Whatever (more) employers can do to ensure participants have access to the best possible information and guidance MUST be done.

2019’s auto-enrollment changes were relatively easily absorbed

2019 auto-enrollment changes

Only, 54% recall the April 2019 pension law changes, with only 24% aware of the specifics.

2019 auto-enrollment changes

But, 71% already contributing the required amount or have been able to meet the increased contribution with ease.

For illustrative purposes only.


And scaling up to Trade in Services Agreements (TISA) recommended 12% rate appears likely to be feasible for many (but not all)

Feasibility of upscaling to 12%

For illustrative purposes only.


Nudging’ contributions to TISA’s 12% recommended rate

Employer puts in 6% and participant puts in 6%, including tax relief


believe they already achieve this level of saving or believe they would be able to do so.


Employer matches contributions up to 6%


believe they already achieve this level of saving or would increase their contributions to try to do so.


Only a small proportion have any idea how their pensions are invested

Knowing how your pension is invested

For illustrative purposes only.



Acknowledging some responsibility to know more does not drive participants to engage


86% feel they should make more effort to understand the investments in pension.


78% trust their employer to make good decisions about how their pensions are invested.


76% do not really care how their pensions are invested as long as it gets a reasonable return.

For illustrative purposes only.


Many are unaware even of generalities, while others have little or no grasp of detail

Big picture

of participants believe their investments are lodged in defaults (as opposed to reality of 90%+)
of participants have no idea whether they are in the default or selecting investments themselves

The detail

of participants do not know the level of risk to which their % pension funds are exposed
of participants have at most a vague idea of the types of investments included in their plans

Interest in ESG is gaining some momentum

Sustainability has the potential to drive engagement and trust, albeit understanding remains inconsistent.
of participants believe schemes should at a minimum offer the option of ESG investments
are aware of ESG or sustainable investments
display some baseline understanding

The survey showed only 32% of millennials could give an accurate definition, compared to 59% of pre-retirees. Is education around environmental, social and governance (ESG) initiatives limited in younger generations?

Across all generations around 72% had not heard of ESG investments.

But what is interesting is when asked: ‘Thinking about your DC pension from your current employer, which one of the following do you feel your employer should prioritise?’ 14% of millennials said sustainable/ethical investments compared to 10% of pre-retirees.

Even though the knowledge base of ESG in millennials is lower, they are prioritising it more.

Although there remain some misgivings with respect to the efficacy of ESG investments

Donut charts


Nonetheless there is considerable appetite to engage

If ESG investments were able to deliver identical returns vs. current default investments but with costs increased from 30 bps to 40 bps p.a.


of participants would invest at least 25% of their pension assets in ESG funds, up from 42% in 2018.


If ESG investments delivered default returns of 5.5% vs. 6% but costs remained static at 30 bps p.a.


of participants would invest at least 25% of their pension assets in ESG funds, similar to 2018’s 47%.

The environmental, social and governance (“ESG”) considerations discussed herein may affect an investment team’s decision to invest in certain companies or industries from time to time. Results may differ from portfolios that do not apply similar ESG considerations to their investment process.

COVID-19 may impact retirement savings behaviours

COVID-19 looks likely to impact directly on retirement saving.


76% acknowledge they will have to think more carefully about their financial futures.

Participants may deprioritise pension contributions in favour of short-term saving and debt reduction / elimination.


51% are likely to review or reduce pension contributions as a result of the ongoing pandemic.

Women are likely to be hit hardest by job losses caused from COVID-19 (Source: BBC, April 2020).

According to The Institute for Fiscal Studies workforce demographics are likely to result in working mothers being 1.5x more likely than male colleagues to have lost their jobs since lockdown commenced.

Beyond COVID, participants’ focus will swing back to retirement saving

bar chart: 2020 - 44%, 2025 - 49%

For illustrative purposes only.

Although ‘rainy day’ savings may remain priority one.

Employers should double-down on communications to stress the need to stay committed to pensions (particularly in light of the ‘lower forever’ rate environment for savers).

Survey takeaways

  • Participants are far from confident as to their financial futures - Financial literacy needs to be improved across all job roles.
  • Gender disparity - Men and women have different priorities. Women are much less likely to be confident of a comfortable retirement.
  • Employees look to employers first and foremost as trusted managers of pension assets.
  • Interest in sustainable investing is growing among participants, even if addition cost may be borne as a result.
  • COVID-19 may impact at least to some degree on retirement savings behaviours.