Over a third (34%) of UK workers are at risk of not being able to cover the cost of their basic needs in retirement, research from Scottish Widows indicates.
A “national retirement forecast” model was created by Scottish Widows and Frontier Economics to estimate the potential retirement incomes of people aged 22 to 65, based on their savings and spending behaviour.
Part-time workers, many of whom will earn below the £10,000 earnings trigger in a job to be automatically rolled into workplace pensions, are particularly at risk of not being able to cover their basic needs, the report indicated.
It analysed the views of 1,000 senior decision makers with responsibility for pensions at their firms and 2,000 employees from a range of sectors.
Scottish Widows said that a need for minimum contribution rates to increase, and people’s pension knowledge gaps, are pushing some workers off course for an adequate retirement pot.
Over a third (38%) of employees have little to no understanding of the pension-related benefits their employer offers, the report found.
But more than two-fifths (45%) of firms surveyed said they provide regular information and support to help employees make informed pension decisions.
Around 41% of firms surveyed said they take an active role in educating employees to engage with their pension, with bigger firms particularly likely to do this.
But even for employees in bigger firms, understanding remains low, the report indicated, with 38% of those working for big businesses having little to no understanding, rising to 41% in small firms and dropping to 36% in those medium sized businesses.
More than one in 10 (11%) firms said their employees are not engaged with their pensions, rising to 20% in small firms with 10 to 49 employees.
Graeme Bold, managing director of workplace and intermediary wealth at Scottish Widows, said: “A workplace pension can be the most powerful tool people have to shape their financial future, but low engagement is holding people back from taking their best shot at long-term saving.”
He said that pension apps, connecting financial products in one place and using “gamified” tools can help people to engage with their pension.
He added: “There’s a broader opportunity for pension providers, employers and those managing employee wellbeing to help them make the most of this workplace benefit.”
The modelling in the report took into account various sources of retirement income, including the state pension, private pensions, other long-term savings, and inheritance.
It compared the retirement income people are on track for to the costs they could face living expenses for different retirement living standards defined by Pensions UK, and housing costs for those who expect to rent or continue to pay off a mortgage in retirement.
The employer survey was carried out online by Opinium Research across a 1,000 senior decision makers with at least joint responsibility over pension schemes within their organisation.
Organisations had at least 10 employees.
The employee survey was also carried out online by Opinium Research, among 2,000 employees across the UK at businesses with 10 or more employees.
Both surveys were carried out between July and August.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “The big concern is that people think that auto-enrolment minimum contributions are set at a level that ensure you will have enough saved for retirement, but this is not the case.
“The HL (Hargreaves Lansdown) Savings and Resilience Barometer has showed that higher earners in particular are at risk of undersaving and not having a lifestyle in retirement that looks like what they enjoyed when they worked.
“It’s hugely important that people think about what they want their retirement to look like so they have an idea of how much it might cost.
“They can then use tools like online calculators to see what they are on track for. This will either give them the confidence of knowing they are on track or the time to put a plan in place if they aren’t.
“It’s also well worth checking to see if you are one of the many people who have lost track of a pension pot during your career. If you think you have, then contact the Government’s Pension Tracing Service.
“All you need is either the name of the employer or the pension provider and they will give you contact details. You could find a pot worth thousands that could make a big difference to how you manage in retirement.”