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Furthermore, according to the recent research from Prudential, a third (31 per cent) of those planning to retire in 2010 have no idea how much the basic state pension actually pays out, with many over-estimating the individual weekly amount by £25 or more.

Martyn Bogira, director of defined contribution (DC) solutions at Prudential, has warned the basic state pension alone may not provide sufficient retirement income for many and has urged those people who are still working to save as much as possible for their old age in company and personal pensions as well as savings and investments.

He said: "Given that so many people expect to retire on the basic state pension, particularly when only half know how much it pays, there is still a clear need for people to understand the consequences of not making adequate provision for their retirement.

"If the basic state pension is your only source of income you could be in an extremely precarious position financially."

Instead Mr Bogira said the basic state pension, which currently pays out just short of £5,000 a year, should only really be used to supplement other sources, such as an income from a pension or an annuity.

He said: "We would urge people to pay as much as they possibly can into their retirement savings, because the state alone is unlikely to be able to support you in your retirement.

"The sooner you start saving, either into a company pension, personal pension or other savings, the greater the amount of money you can build up to help provide for you when you do come to retire."

The Prudential research also found that one in four people over-estimate the state pension payments.

For example, 24 per cent of those surveyed believe the state pension pays out between £110 and £175 a week while 7 per cent simply said they didn't know how much it pays.

A fifth (21 per cent) estimated the state pension paid £100 a week, when the actual maximum amount for an individual is £95.25 a week.

The state pension will, on average, account for just over 34 per cent of income in retirement for those people who say they plan to retire in 2010.