The warning was issued in the 21-page department for work and pensions document, Framework for the Analysis of Future Pension Incomes, where it was revealed that people currently working are not able to build adequate pots for their retirement.
The report found that even with the rise of workplace schemes, auto-enrolment and pension benefits increases since the turn of the century, millions of people still face an uncertain financial future.
Although 50 per cent of these are within 20 per cent of their desired amount, and can use financial planning to help them meet their goals, a further 50 per cent face “significant challenges”. Initial predictions from the DWP was that there would be a 25 per cent opt-out rate with auto-enrolment, but current figures suggest the average rate so far among larger employers is 9 per cent. Most firms are not yet at their staging dates.
Currently, people in work with qualifying earnings of £9440 or more are automatically enrolled into a pension scheme at work.
The government is therefore reviewing how the existing pension reforms are working, and how people can be helped to save more in work and to save enough overall.
However, it was clear that the DWP believes “the responsibility lies within individuals to take action to ensure they are building up the retirement incomes they desire”. The report reiterated: “The government is working to restore confidence in the system so that individuals do not opt out of auto-enrolment unnecessarily, so that they save enough into their pensions and that they get the most out of what they save into their pensions.”
Nigel Green, chief executive of international wealth manager deVere Group, said: “It is alarming that nearly 13m Britons will be unable to live a comparable lifestyle in retirement. Britain has lost its appetite to save and this is the depressing, yet predictable, result of that.”
He said some joined-up thinking between employers, government and advisers could help. He added: “Financial planning in the workplace would be beneficial. The government should promote the idea of saving through multimedia campaigns. The financial advisory sector should rebuild the public’s confidence in the wider financial industry.”