Today's workers will need to keep plugging away well into their golden years if they want to afford the same standard of retirement as their parents, a report out today has found.
The study by pensions company Royal London discovered that people on average earnings would need to continue to work until they are 77 if they want to retire on two-thirds of their pre-retirement income and if they only save eight per cent of their salary into their pension, assuming they started saving when they were 22.
Eight per cent is the total minimum contribution required under auto enrolment, including a five per cent contribution from the employee, from April 2019 onwards. At present, contributions are set at just two per cent, including a one per cent contribution from the employee, until April 2018.
"Getting millions more people saving through automatic enrolment is a huge step forward, but many face a cruel disappointment if they think that current minimum contribution levels will deliver them the sort of retirement they are looking for," said Steve Webb, director of policy at Royal London. "Without significant increases in contributions, we could be witnessing the death of retirement."
Those who delayed starting their pension pot until they were 35 will need to keep going until they are 79, while those who did not start saving until they were 45 will find themselves still having to come into the office well into their 80s.
The report concludes that, for many, the rate required under auto enrolment is far too low, suggesting that contributions worth 20 per cent of gross salary would be needed for somebody to obtain a comfortable retirement.
"This report shows that today’s workers are unlikely to be able to secure the quality of pension provision enjoyed by many in previous generations without either working well beyond pension age or contributing substantially more. Even those who save systematically from the start of their working life could face working into their late seventies if they want to replicate the best pensions of those retiring today."
Pensions auto enrolment has been gradually being introduced since 2012, with the date businesses need to join depending on how many employees they have.
Earlier this month, a report by Willis Towers Watson discovered that almost three-quarters of British workers felt their parents generation will have a far more comfortable retirement than they can hope to achieve, while those in their 30s are regularly worrying about long-term and immediate finances.