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Private-sector employees don't see pension savings as the best way to fund retirement

Although employers see pensions as a core part of their reward package, fewer than half of staff in the private sector think they are the best way to save for retirement, new research reveals.

According to the CIPD and BlackRock, only 28% of private-sector employees know how much they should be saving for their future and 56% are worried they will not have enough.

But, despite more than half worrying they are not saving enough, 48% have not reviewed their pension contributions over the last two years, even though 47% think they will have to work longer than they anticipated five years ago.

Just under a third (31%) of employees cited financial constraints as a major reason for not saving into a pension. Other methods of funding retirement include inheritance (19%), downsizing or selling property (21%), the state (14%) and support from family and friends (6%). 

But more than a quarter (27%) are expecting to get another job after retiring to supplement their income.

Steve Rumbles, head of UK defined-contribution pensions at BlackRock, said: "Pensions are too vital for anyone to consign them to the ‘Too Difficult' pile.  Worryingly, our research shows that many employees do just that, fearful of something they inadequately understand, which seems expensive, inflexible and wrapped in jargon. 

"The good news is that there are measures to deal with this, available now, or soon to be introduced.  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 will serve an important need. The challenge we face is encouraging employees and some employers to accept the reality that the ‘pay as you go' state pension system is not sustainable and therefore cannot be relied upon to fund retirement.  Employers, providers and Government must work together to ensure generations to come will understand that saving for retirement is not a desirable, but an essential. Retirement matters."