UK - People with defined contribution (DC) pension schemes tend to be "overly optimistic" about meeting their retirement targets, according to Towers Watson.

The consultancy said fiduciaries would do well to adopt a more "outcome-focused" governance approach to DC in order to help people achieve better pension outcomes.

Gary Smith, senior DC consultant at Towers Watson, said increasing contributions and encouraging earlier employee enrolment, while increasing an individual's retirement savings, would be costly for employers and may be unfeasible.

"Outside of increasing the size and/or duration of contributions, DC plan fiduciaries have a vital role to play in helping members achieve a better pension outcome and better understanding of the risks they face," he said.

Towers Watson's research found that most UK workers would like to retire between 55 and 60 years of age, but "most are realistic enough to know that is unlikely" and will instead aim to retire between 60 and 65.

However, the consultancy said even this was likely to be overly optimistic given current contribution and savings rates.

The report found the average UK employee expects to need a pension of around 65% of his salary before retirement - close to the two-thirds of final salary that has historically been targeted by defined benefit schemes.

But it highlighted wide variations around this average - approximately 13% expect to need less than half their final salary, while 25% expect to need around half their final salary and 27% expect to need a retirement income of at least 80%.

"It is essential DC plan fiduciaries really understand the profile and segmentation of their plan's membership, in terms of their retirement outcome expectations and what they think is adequate," Smith said.

"Fiduciaries need to build their investment and engagement strategies around this understanding and the derived implications for investment risk and return, as well as targeted communication messages.

"What is right for one DC plan and its membership profile will almost certainly not be the most appropriate for another."