Workplace defined contribution (DC) pension scheme members lack an understanding of their potential retirement income and the options available to them at retirement, research from CoreData has shown.

Its survey of 3,000 DC scheme members highlighted gaps across a range of key pension areas, with just 19 per cent having a good understanding of their potential retirement income and 21 per cent knowing the contribution levels needed to achieve their desired retirement lifestyle.

Furthermore, only 17 per cent of respondents reported a good understanding of the options available to them at retirement, while 16 per cent understood pot consolidation well, and 17 per cent and 18 per cent knew how their pension was invested and taxed respectively.

These knowledge gaps were translating into a lack of meaningful action, CoreData noted, as 68 per cent of members had never changed how their pension was invested and 66 per cent had never consolidated their DC pots.

Meanwhile, 62 per cent had never set a specific retirement date and 55 per cent had never increased their monthly pension contributions.

Despite these issues, the research found relatively high levels of digital interaction with DC providers, with 55 per cent of members having used their provider’s online portal to check or manage their pension over the past 12 months, while 39 per cent had used their mobile app.

However, fewer than a third had accessed online information on areas including contributions needed for their desired retirement lifestyle (32 per cent), how inflation impacts pensions (26 per cent), options available at retirement (25 per cent), and potential overall retirement income (25 per cent).

“Encouragingly, our findings show that a growing number of members across all age groups are now visiting their pension providers’ digital channels,” commented CoreData head of research, Europe, Joe Dalton.

“But on the flipside, we see that this interaction is not translating into engagement that boosts member understanding and ultimately spurs meaningful action.

“Our analysis highlights how financial literacy, life stage and wealth levels all affect not just the type of information needed by different members to support better decisions, but also the way in which that information is delivered.

“Some cohorts are avoiding engagement with their pension because they’re afraid of what they might find, others are eager to take action but struggle to understand what income they will need and what their current trajectory is – and then there are more complacent members who think they’ll be fine because they are making the minimum auto-enrolment contributions.

“Given these different factors, a one-size-fits-all approach to member engagement is unlikely to drive the necessary behavioural change to meaningfully improve retirement outcomes.”

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