Pensions disaster ahead - BlackRock

Widely different attitudes to pensions savings mean employers and employees are "sleepwalking into a retirement disaster", new research from BlackRock suggests.

Less than half of private sector employees view pensions as the best way to save for retirement. This is in contrast to the view of employers who consider pension provision a core part of their reward packages.

Charles Cotton, CIPD Chief Reward Adviser, says: "Many employees are planning to rely on downsizing their home, family hand outs or government to support them in retirement, while many employers will face the prospect of trying to motivate an older workforce who are simply soldiering along because they cannot afford to retire."

Confusion about how much to save is another key issue. Only one in four (28%) private sector employees knows what amount they should be saving to ensure a comfortable retirement.

But Steve Rumbles, head of UK DC Pensions at BlackRock, calls pensions "too vital for anyone to consign them to the ‘Too Difficult' pile".

More than half (56%) of respondents are worried that they will not have enough money to meet their retirement needs, yet fewer than half (48%) of those interviewed have reviewed their contribution levels within the last two years.

Pessimism about the future is widespread, with 47% having resigned themselves to working longer than expected five years ago.

Affordability - 31% give financial constraints as a major reason - and a lack of confidence in pensions are the key causes why employees fail to contribute to a scheme.

Workers sceptical towards company pensions are casting around for other sources of funding, including inheritance (19%), downsizing or selling property (21%), the State (14%) and support from family and friends (6%).

More than a quarter (27%) of workers also expect to work during retirement to boost their income.

But Rumbles is hopeful new measures will have a positive impact on the pension deficit.

"Employees can already use interactive online tools to gauge what they'll need in retirement, and what to save to achieve that. The ‘save more tomorrow' approach - where contributions increase as the employee's salary grows - works well in the US and is gaining traction here."

"The introduction of auto-enrolment in 2012 should help to overcome the inertia that prevents so many employees joining schemes today," he adds.