The proportion of people not on track for a ‘minimum’ standard of living in retirement increased to 38 per cent over the past year, research by Scottish Widows has found.

The provider’s 20th annual Retirement Report showed a 3 percentage point rise in the number of people that would not meet the Pensions and Lifetime Savings Association’s minimum Retirement Living Standard compared to last year’s report.

This is equivalent to an additional 1.2 million people, which is greater than the working populations of Liverpool and Birmingham combined.

Around a third (34 per cent) of respondents felt they were preparing adequately for retirement.

Scottish Widows noted that the increase in those forecast to suffer the poorest retirement outcomes had been driven by rises in the cost of living relative to wage growth.

The provider’s report also warned that a delayed retirement was likely for millions of people in the UK.

Most people would like to retire at 62, but more than half (54 per cent) of respondents expected to work for longer than they would like to, on average by seven years.

More than a quarter (27 per cent) of those who have made retirement plans believed they would never be able to retire.

Younger people (aged 18-29) wanted to retire earlier than average at 61, and were only prepared to work until they reach 64 if necessary, four years earlier than their state pension age.

Survey respondents also highlighted people’s reliance on the state pension, with 54 per cent expecting the state pension to form a ‘meaningful portion’ of their retirement income and 75 per cent calling it ‘hugely important’ in helping them pay for everyday necessities.

However, 12 per cent said they were not convinced this level of help would be available to them by the time they retire.

“The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern,” commented Scottish Widows head of pensions policy, Pete Glancy.

“It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for. In the meantime, helping people to make the very most of what they have is going to be critical.

“It’s the right moment for the new government to take a holistic view on people’s financial resilience throughout life, paying particular attention to those whose retirement outcomes are predicted to be much lower.

“At present only the wealthiest tend to rely on professional support from a qualified financial adviser. As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.”

Barnett Waddingham partner, Paul Leandro, added: "This research paints a worrying picture for future retirees, and is a stark reminder that we're yet to defuse the 'ticking timebomb' that is the UK's pension system.

"Time and time again, research has pointed to the inadequacy of pensions contributions across all age groups, and until there is a significant increase the situation will only worsen. This is particularly concerning as defined contribution, or workplace, pensions have become the main source of retirement savings for a significant proportion of the population, and means real change will be needed if people are to have the retirement they desire.

"Various research suggests that realistically people should be saving on average around 12 per cent or more of their annual income into their pension pot, however actual levels are often far below this even when taking into account employer contributions. And more often than not, this is not done out of intention - but a lack of awareness and engagement."

"The recently announced pensions review offers some hope that things will change, but the concern is about timing. Pension inadequacy, whilst on the list, is a secondary priority for the review. The longer the delays, the more the risk that future cohorts of people will not have secure or dignified retirements.”

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