These comments come after the Office for National Statistics published figures revealing that state pension contributions now account for less than half of retired households.
Figures showed the overall proportion of income for retired households coming from the state has fallen to 47.1 per cent in 2014 to 2015, from 64.7 per cent in 1977.
Kate Smith, head of pensions at Aegon, said on the surface this might look like encouraging news that people are making more personal provision for a more comfortable retirement but argued it is “not a cause for complacency” for those of working age saving for retirement.
She said: “The current generation of retirees are benefitting from private pensions they built up with gold-plated defined benefit pensions and favourable tailwinds such as decades of rising house prices, economic growth as well as the triple lock state pension.
“With the working population’s incomes stalling and the decline of generous defined benefit pensions, this isn’t likely to be the case for people retiring in 10 years’ time unless there is a fundamental change in savings behaviour.”
Between 2014 and 2015, the median income for retired households was £21,000 a year, which is well below the median income for non-retired households of £28,300 a year.
But since the economic downturn in 2007, retired households’ median income has increased by £1,500 on top of inflation compared to a fall of £900 for working households.
Ms Smith said this was an “intergenerational issue”, as the next generation to retire is less likely to benefit from a combination of a generous state pension increases and gold-plated defined benefit pensions.
She added: “Every generation aspires to have a better financial future than the previous generation but this will not continue unless people make adequate pension savings and start saving as early as they can.”
She pointed out that to build up an amount equivalent to the state pension you need to have private pension savings of around £200,000.
“It is quite clear there is a major problem with retirement income provision due to emerge in the next twenty years, although this is not going to show itself immediately.” Matthew HarrisMatthew Harris, director of Fife-based Dalbeath Financial Planning, said: “It is quite clear there is a major problem with retirement income provision due to emerge in the next 20 years, although this is not going to show itself immediately.
“By 2020, most people reaching retirement age are going to have a shock as they realise how little in the way of guaranteed annual income their pensions provide.
“They will be able to pretend this problem doesn’t exist for a while, by moving into income drawdown and taking an unsustainable level of income from their pension funds, but as these pots run out then things will get serious.”
Mr Harris added: “I would expect a very large number of people to be falling back on virtually no pension provision about the state pension by 2030.”
katherine.denham@ft.com