Nearly half (48 per cent) of people with a defined contribution (DC) pension are not confident they will have a comfortable retirement, research from Barnett Waddingham has found.

The primary reason for not expecting a comfortable retirement was not having enough money saved in their pension pots, with 35 per cent of unconfident DC savers citing this as their main concern.

This rises to 45 per cent of 51-55 year olds and 47 per cent of 61-65 year olds.

Around a third (32 per cent) do not believe they earn enough to save for a comfortable retirement, while 29 per cent do not have any other savings or investments and 19 per cent have not saved enough to cover both them and their spouse.

DC savers were also found to be worried about costs, with 12 per cent expecting to still be renting in retirement and 8 per cent believing their retirement pots will go towards care costs.

More than a quarter (26 per cent) of those not confident about retirement did not know what a comfortable retirement would look like or how to get there, and 8 per cent had not thought about retirement at all.

Meanwhile, 29 per cent did not think a comfortable retirement would be possible when they are older due to climate/social change, rising to 47 per cent of 25-30 year olds.

Despite a large proportion having concerns, 52 per cent of respondents were confident that they would have a comfortable retirement.

Most of those expecting a comfortable retirement cited other investments beyond their DC pension pots, with 29 per cent having other investments and 28 per cent owning a property outright.

However, men were more likely to have other investments than women (33 per cent compared to 25 per cent) and own their own property outright (32 per cent versus 25 per cent).

Furthermore, property ownership was more likely among older age cohorts, with less than 20 per cent of 18-40 year olds owning a property, compared to more than 50 per cent of those aged over 50.

Less than one in 10 (8 per cent) were confident as they had a defined benefit (DB) pension to cover the bulk of their needs, with older cohorts more likely to have DB pots.

Barnett Waddingham found that confidence differs between age cohorts, with younger people tending to be more confident, with a decline in confidence until age 55 when it begins to rise again.

Nearly three quarters (71 per cent) of 18-24 year olds and 61 per cent of 25-30 year olds were confident of a comfortable retirement, with confidence then steadily declining down to the least confident age group of 51-55 year olds, of which 42 per cent were confident of a comfortable retirement.

After 55, confidence jumped back up to 50 per cent or higher, although 32 per cent of people set to retire within two years were not confident in a comfortable retirement.

Age was found to not be the most important factor when it came to retirement planning, with the number of years people expect to work to retirement “more critical”.

By the point of five to 10 years until expected retirement, 58 per cent were confident, rising to 71 per cent of those with three to four years until retirement, before falling to 65 per cent of those retiring in one to two years, and rising again to 73 per cent of people retiring within a year.

“In a rare glimmer of good news, people are currently more confident about retirement the closer they are to it, meaning something is going right,” commented Barnett Waddingham partner and head of DC pensions, Mark Futcher.

“But there are two key areas for concern. Firstly, a third of people planning to retire in a couple of years are going into that period of their life without confidence that they’ll be able to live comfortably. And most people who are confident are such because of other wealth, property, or private and DB pensions.

“This is not much use to most young workers, who tend to have low savings, lower prospects of buying a house, and solely DC workplace schemes."

He continued: “There’s two major solutions that policy-makers must pursue. The first is to improve the auto-enrolment system, by widening who it includes and increasing minimum contributions - including auto-escalation of contributions with pay rises and after career breaks. The aspiration should be to build a DC system that generates employees a comfortable retirement, without needing further wealth to survive.

“The second is to hone in on the cohort approaching retirement, and work to ensure that people are able to confidently visualise their income and lifestyle after employment, This is going to require significant innovation and a much more robust at-retirement framework, specifically working to increase confidence in older workers that a comfortable retirement is possible for them.

“With political upheaval likely in the months ahead, it’s critical that the industry pushes for consistency of focus - long-term pensions cannot be a short-term political football.”

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