Scottish Widows has called for a hike in the auto-enrolment contribution rates from 8 per cent to 12 per cent to beat chronic underfunding of employees' pensions.
The pension provider's 13th annual Retirement Report finds the number of people saving adequately for retirement has stalled at 56 per cent for the third year in a row.
Since auto-enrolment was introduced five years ago, the number of adequate savers in the UK has risen from 46 per cent to 56 per cent, according to an online Scottish Widows poll of 5,314 nationally representative adults in April 2017.
But one in five adults in the UK (18 per cent) is still not saving anything into a pension and 70 per cent of under 30s are not saving adequately.
Pete Glancy, head of policy development at Scottish Widows, said auto-enrolment may well be lulling people into a false sense of security that they are putting away enough for a comfortable retirement.
"For many, particularly those only making the minimum contribution, that is simply not the case given retirement is looking more expensive, and longer, than ever.
"We want the government to take the opportunity with the auto-enrolment review to make some rule changes to help people save more.”
Minimum auto-enrolment pension contributions are already due to rise to 8 per cent in April 2019, up from 2 per cent now.
But Scottish Widows has calculated that 12 per cent of salary is an adequate savings level - and is urging the government to make this the new minimum contribution level into a workplace pension by 2020.
Britons can only start to benefit from auto-enrolment when they are earning over £10,000.
Scottish Widows is calling for this barrier to be removed to ensure low earners, those working part-time or in multiple jobs can benefit from auto-enrolment.
The pension provider wants the industry to go further so every worker benefits from auto-enrolment – even those who can’t afford to contribute.
It wants the government and industry to explore how these people can still receive an employer contribution, while not discouraging others from making personal contributions.
One suggestion is that auto-enrolment is simplified, with contributions paid on every pound earned, rather than qualifying earnings which can see the first £5,876 of salary discounted when calculating contributions.
The plight of young people in particular has struck a chord.
Elliott Silk, head of commercial at Sanlam, said young people are walking into a "retirement black hole".
"The combination of sky-high rent, living costs and student loan repayments is clearly having a detrimental impact on their ability to think about longer-term saving.
"Although auto-enrolment has made a positive headway in getting young people engaged with their pensions, it hasn't gone far enough."
Mark Grimes, product director at robo-adviser EValue, suggested developments in robo-advice could help make financial and retirement planning more accessible and relevant for millennials.
Stephen Coates, principal, JLT Benefit Solutions, said an 8 per cent contribution is a long way from delivering fully-funded retirements.
He said policyholders themselves need to be actively involved in determining and reviewing their savings levels, monitoring charges and investment performance, as well as making the right choices at retirement.
"The first hike in contributions provides a great opportunity to further prompt savers to take greater responsibility towards their retirement.”
Glenn Dyer, partner, of Cambridge-based IFA Martin-Redman Partners backed increased contribution levels.
"I also think that the opt out should be removed and new staff entering the workforce for the first time, for example at 18 should have their contributions phased in over the 4 years to age 22 rather than getting the full hit post April 2019," he said.
The Department for Work & Pensions is currently undertaking a review of auto-enrolment headed by Ruston Smith, trustee director at People's Pension, Jamie Jenkins, head of pensions strategy at Standard Life, and Chris Curry, director of the Pensions Policy Institute which is set to report by the end of the year.
More than eight million people have been auto-enrolled into a workplace pension by more than 500,000 employers according to the Department for Work and Pensions.
Auto-enrolment applies to workers aged at least 22, but under state pension age, usually working in the UK and earning more than £10,000 a year unless they are already a member of a pension scheme that meets certain criteria set out in law.
A worker who is auto-enrolled into a scheme has the option to opt out of it within one month if they choose.
At the moment, employers and employees must each contribute 1 per cent of an employee’s qualifying earnings until April 2018 when employer minimum contribution rates will rise to 2 per cent with employees contributing 3 per cent.
By April 2019, employers must pay a minimum of 3 per cent of qualifying earnings per employee into a pension scheme with employees contributing 4 per cent with the government adding 2 per cent tax relief.
Employers need to repeat the auto-enrolment process approximately every three years.
