Employees with defined contribution (DC) pensions fear they will never be able to afford to retire, with rising living costs sparking concerns about retirement adequacy, research from Wealth at Work has shown.

It found that 38 per cent of UK workers with a DC pension were worried they will not be able to afford retirement due to the impact of increased living costs.

The research highlighted widespread concerns about retirement adequacy, with 83 per cent of employees expecting rising living costs to leave them less comfortable in retirement due to a pension shortfall.

This was a slight increase from 81 per cent last year, which Wealth at Work said indicated a worsening financial outlook for many people.

More than a third (36 per cent) of DC pension savers would like more information about how much they will need to retire comfortably.

Meanwhile, 82 per cent of respondents were worried they will need to work for longer to make up for a shortfall in pension savings, up from 80 per cent last year.

When asked about their total workplace pension contributions, 41 per cent were saving at or below the minimum 8 per cent of earnings, while 10 per cent did not know how much was being contributed to their pension.

Almost a third (29 per cent) were contributing between 9 per cent and 11 per cent, while 20 per cent were contributing 12 per cent or more.

While the majority of workers were contributing below the Living Pension benchmark, 45 per cent believed they were saving enough.

Wealth at Work said this highlighted a clear gap between perception and reality when it came to retirement preparedness.

A third (33 per cent) of workers said they currently could not afford to increase contributions, although 30 per cent planned to increase them in future and 25 per cent would like support on how to do this.

“Many people are understandably worried about whether they’ll ever be able to afford to retire,” said Wealth at Work director, Jonathan Watts-Lay.

“When meeting day-to-day living costs become difficult, it’s often long-term savings that take a back seat.

“One of the problems is that pensions can feel complex and distant, making it easy for people to disengage.

“That’s why ongoing support throughout someone’s working life is so important. The earlier individuals engage with their finances, the more options they’re likely to have later on.

“Workplace financial education plays a critical role, giving people the knowledge and confidence to make informed decisions early and consistently.”

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