Hargreaves Lansdown has found that less than 40 per cent of people are on track to receive a moderate level of income in retirement, as set out by the Pensions and Lifetime Savings Association.
The provider’s new savings and resilience barometer found people were not saving enough to achieve a retirement income of £20,800 a year, for a single person to achieve a moderate standard of living. Whereas a couple would need to save £30,600.
This includes the state pension which can be worth up to £9,340 a year per person.
The barometer found 71.5 per cent of those on the highest income were on track to hit this target, but this is not surprising given higher income means higher contributions.
It then fell steeply for the next highest income group to 47.2 per cent.
The research found 45.2 per cent of Generation X (those born between 1965 and 1980) were on track to hit this target but only 17.7 per cent of Generation Z (those born in the late 90s or early 2000s) could say the same.
Whereas a third of millennials (1980s to 1995) were on track for a moderate income.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown, said if people did not take action now then many face living only the most basic standard in their later years.
Morrissey said: “While some groups, notably Generation X are making better progress this may be because they are more likely to have benefited from final salary pensions. Others may have also started to take their retirements more seriously as they get older and so are putting more money into their pensions. Younger generations look far more exposed with Generation Z in particular lagging when it comes to saving for retirement.
“Retirement can seem like a long way away and it’s tempting to shelve the longer-term planning when there are pressing demands on our finances. However, we know the earlier you start contributing to your pension the better.
“We need people to engage more and if possible, go over and above auto-enrolment minimums when it comes to contributions as over time this can add up and make a huge impact on your resilience in retirement.”
Hargreaves Lansdown launched its barometer earlier this month, which measures the financial resilience of the nation every six months.
The measure is based around five pillars of financial behaviour that Hargreaves Lansdown said were “fundamental” for households to balance financial demands while being aware of risks.
These are controlling your debts, protecting your family, saving for a rainy day, planning for later life and investing to make more of your money.
amy.austin@ft.com
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