UP your DC game

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.

In May 2021 we ran our 4th BlackRock DC Pulse Survey of 1,000 UK defined contribution (DC) members. This year we focused on:

  • The impact of COVID-19
  • Confidence in retirement preparedness
  • Investment arrangements; engagement with investing; and attitudes to control and risk
  • Attitudes towards sustainability and ESG factors
  • Gender disparity

About this survey: The source of data throughout this page, unless stated otherwise, is: BlackRock DC Pulse 2021, 1,000 UK DC participants. Survey ran through May 2021.


COVID-19 has had a mixed impact on financial wellbeing

76% affected by COVID-19

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

COVID-19 has impacted directly on participants’ financial future.

53%

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

Participants are focused on short term contingency planning

Financial priorities chart

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

Participants are focused on short term contingency planning at the expense of pension contributions

Short term contingency planning has continued to take priority at the expense of pension contributions. A short-term focus is most striking amongst those most heavily impacted by COVID-19

There is one demographic who did not fare as badly as others

COVID effect on older participants

of those aged 65+ have saved money over the last year

COVID effect on older participants

of those aged 65+ feel financially better off because of COVID-19

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

The importance of retirement saving

Importance of retirement saving chart

Source: BlackRock DC Pulse Survey 2021

For illustrative purposes only.

Looking beyond COVID, participants’ focus will swing back to retirement saving eventually. Although ‘rainy day’ savings may remain priority one in the short term.

TAKEAWAY: 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)

UK participants are far from confident in their financial futures

Preparedness chart

Source: BlackRock DC Pulse Survey 2021

For illustrative purposes only.

The proportion of participants who feel unprepared for retirement is at an all-time high

More participants than ever before are concerned that they will be unable to enjoy the lifestyle they want.

Contributions have been impacted by COVID-19 and remain short of recommended levels

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.

Contribution levels do 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.

The proportion of participants who do not believe their contributions is adequate is rising 

54% feel they are not contributing enough, an increase of 5% since 2020.

Participants lack confidence managing their pensions and are typically unengaged

Illustration of DC pension awareness

of participants are not aware of the current balance of their DC pension

 


Illustration of DC pension awareness

only check the current, and projected value of their DC pension annually

23%

never check either the current, or projected, value of their DC pension

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

TAKEAWAY: communication and education remain areas for improvement from schemes. Guiding members through pension planning is key.

It’s my employer’s responsibility

90% trust their employer to do the right thing

* 2020 Edelman Trust Barometer

Source: BlackRock DC Pulse Survey 2021

For illustrative purposes only.

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

85% of participants don’t know how much risk their pot is exposed to.

That being said, there has been a 20% growth in members’ awareness of investment choices in the last year.

 

 

Contributions remain short of The Investing and Saving Alliance’s (TISA) recommended levels

56% feel underprepared for retirement

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

 


 

The ‘magic’ TISA number – 12% of salary – seems worlds away for many

56% feel underprepared for retirement

believe combined contributions should equal or exceed 12%
56% feel underprepared for retirement

currently make combined contribution at this level or above

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

Investment knowledge is low among participants

Illustration of investment awareness

Source: BlackRock DC Pulse Survey 2021

For illustrative purposes only.

Only a very small proportion of participants have any idea how their pensions are invested.

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

Illustration of investment knowledge

feel they should make more effort to understand the investments in their pensions

Illustration of investment knowledge

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

Illustration of investment knowledge

do not really care how their pensions are invested as long as it gets a reasonable return
Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

Awareness of pension realities shows communication gap

Big picture
Illustration of DC investments
of participants believe their investments are lodged in defaults (as opposed to reality of 90%+)
Illustration of DC investments
of participants have no idea whether they are in the default or selecting investments themselves
The detail
Illustration of DC investments
of participants do not know the level of risk to which their pension funds are exposed
Illustration of DC investments
of participants have at most a vague idea of the types of investments included in their plans

Interest in ESG is gaining more momentum

ESG options expected
of participants believe schemes should at a minumum offer the option of ESG investments
Illustration of contributions
of aware of ESG or sustainable investments
Illustration of contributions
display some baseline understanding

Climate change is uppermost in the minds of many participants

35-44 yr olds (in particular those with children) place Climate Change at the head of their concerns (48% vs. 32% of others).

Younger Millennials (25-34 yrs old) place considerably greater emphasis on Social issues than other age groups (25% vs. 15% of older age groups).

ESG expectations illustration

believe ESG investments will make their money work for a better future for everyone

ESG expectations illustration

feel that ESG investments would make them feel good to know they are contributing to something with a positive impact on the world

Source: BlackRock DC Pulse Survey 2021
For illustrative purposes only.

Survey takeaways:

  • COVID-19 has had a large impact on most participants. More negatively on women and those further from retirement.
  • Participants are far from confident as to their financial futures - financial literacy needs to be improved across all job roles.
  • Participants are more aware of pension investments.
  • Employees look to employers first and foremost as trusted managers of pension assets.
  • Interest in sustainable investing is growing among participants, even if additional cost may be borne as a result.