That’s a £187billion shortage in the UK’s 65-year-old age group.
And as living expenses soar, adequate retirement savings and expectations of a “comfortable retirement” are under threat, warns new research from wealth manager Nutmeg.
The figures follow a government warning that millions of workers are not saving enough to pay old-age bills.
Sixty percent of people will lose an “adequate standard of living” in retirement unless they save more money.
And people over the age of 40, women and part-time workers are most at risk, according to MPs on the Work and Pensions Committee.
In today’s money, people aged 65 and over say they need £29,500 a year after t0061 to be able to pay bills in old age without worry.
But Nutmeg’s analysis of official private pension data shows they can expect to receive around £16,500, which equates to a shortfall of over £13,000.
This deficit widens further to over £16,500 a year if those without a pension (around 689,000 people) are included in the 65 age bracket.
Among those with no retirement savings, the top three explanations were all related to financial concerns.
As many as 5.3 million have no pension because they say they cannot afford to save, 30% are unemployed and receiving state benefits while 24% say they pay bills and debts.
Meanwhile, minimum pension contributions are too low and many self-employed and gig-economy workers are completely excluded from retirement savings, the Work and Pensions Committee report warned.
People over the age of 40, who have had little time to build up their retirement kitty thanks to car–registrationare particularly at risk if they do not have access to a generous end-of-career pension.
The committee of MPs recognized that the current cost of living crisis is not the time to ask people to contribute more in their retirement.
But employers should raise their minimum payout in any self-enrolling work pension from 3% to 5%, the report said.
The ‘trigger’ for someone to be automatically placed on a work pension occurs if they earn at least £10,000 in a job and are aged between 22 and the statutory retirement age.
The total minimum contribution to pensions is currently eight per cent of pensionable earnings, of which at least three per cent comes from the employer and the remaining five per cent from contributions from employees, who also receive tax relief.
However, simply meeting the minimum is unlikely to give many people the level of retirement income they want.
Mark Futcher, partner at Barnett Waddingham consultants, said: “For a comfortable retirement, people need to save around 12% of their annual income in their pension fund.”
“Most people save well below that, even taking into account employer contributions.”
“Many people basically don’t save at all, either because they’re the ‘wrong’ age or because they’re working multiple jobs and therefore aren’t caught up in car–registrationor because they had to interrupt their contributions to face the increase in the cost of living.