Defined contribution (DC) pension contributors are saving £11.4bn less than they need to each year, according to a survey by Aon Hewitt.
The UK-wide survey also found individuals were, on average, contributing £1,400 a year too little into their pension pots and that less than a fifth (16%) of people contributing to a DC pension scheme were saving enough to maintain their standard of living in retirement.
Carried out by YouGov, the survey concluded 8.1 million people to a DC scheme, and of these, around a third (2.75 million) do not know the level of retirement income they are expecting to receive. Additionally, around half (4 million) will not have saved enough at retirement to maintain their standard of living, based on their own expectations.
Aon Hewitt partner and head of DC consulting Sophia Singleton, said: "Auto-enrolment has successfully increased participation in pension schemes, but the vital next step is to ensure these new entrants save a sufficient amount for retirement.
"It is crucial for employers and trustees to have the right structures in place to make retirement saving easier to understand, which would encourage employees to contribute more."
The survey suggested DC contributors were out of touch with their savings requirements. Although there are now more members enrolled on DC schemes, and government projections are favourable, 37% of people are saving less than 5% of their annual salary, while a further 48% are saving between 5% and 10%.
Despite low savings rates, of those who knew how they wanted to take their benefits, two-thirds told the survey they still wanted a stable income in retirement.
In real terms, according to Aon Hewitt, this means that, to maintain his standard of living, a male DC member aged 25 and earning £22,500 a year needs to save 18% of his salary, or £4,050 per year, to maintain his standard of living if he wants to retire at age 65.
Meanwhile a male DC member aged 40 and earning £30,500 needs to have already saved a pot of twice his salary - in other words, £61,000 - and continue to save 19% of his salary to maintain his standard of living if he wants to retire at age 65.
Singleton added: "There is a real responsibility to provide adequate and clear communications in order to improve member engagement and contribution levels."
For her part, Aon Hewitt partner Lynda Whitney called on the government to work with the pensions industry to improve member engagement and reduce the savings gap.
She said: "Employers are expected to help members navigate through the complex pensions environment, but the government also has a responsibility to make it easier for companies to put in place the right kind of retirement savings structures."
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