Long‑term savers risk falling more than £200,000 short of a comfortable retirement even after four decades of saving, according to new analysis by Investing.

The study found that someone putting away £300 a month for 40 years, earning an annual return of 4.15 per cent, would still end up £206,123 below the level needed – with inflation rubbing out the bulk of their investment gains.

The analysis used Pensions UK’s Retirement Living Standards (RLS) to look at what people save for retirement versus what they will need.

The standards have built inflation directly into their calculations by regularly updating the cost of each retirement “basket” of goods and services to reflect current prices.

The analysis revealed a huge gap between what people typically save and what they need for a “comfortable” retirement, which, according to the RLS, would require a pot of around £842,000 to fund for 25 years.

The analysis found that saving £100 a month at a 2.15 per cent return for 40 years would build a pot of only about £121,000, leaving a shortfall of roughly £721,000.

Increasing the investment to £300 a month increased the pot size to roughly £273,000, still leaving a deficit of about £569,000.

A 3.15 per cent rate of return brought the required pot down to about £752,000. But someone saving £300 a month for 40 years would still be left with a gap of close to £396,000.

Even in the best scenario modelled – £300 a month at the strongest rate of 4.15 per cent – savers would still fall £206,123 short.

Commenting on the figures, Investing CEO, Toby Robinson, explained that the gap between what savers see on screen and what their money can actually buy has gone unnoticed for far too long, and the retirement figures are where they really hit home.

"You can put away £300 a month for your entire career and still fall hundreds of thousands short of what you need,” he said.

“Getting out of a sub-inflation account and into something that gives your savings a fighting chance is the single most practical step.”

"You can do that by moving some savings into accounts that track higher interest rates, using tax-efficient wrappers like ISAs, or gradually shifting long-term money into diversified investments.

"Steps like these can help returns keep pace with rising prices," Robinson concluded.

The study also looked at what would happen to a deposit of £19,214 (roughly what a saver might have in a cash ISA) and tracked how it would fare over 40 years at three different rates of return, adjusted for a weighted UK inflation figure drawn from historic data.

At the lowest rate of 2.15 per cent, a saver would gain £26,157 in interest over the four decades but lose £31,056 to inflation, eroding almost £5,000 in real purchasing power.

At the 3.15 per cent rate of return, the real gain after 40 years would be only £2,122, and at the highest rate of 4.15 per cent, the figure would be a healthier £12,577.

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