Nearly one in four (24 per cent) of those aged 40 to 75 do not have a private pension, research from the Department for Work and Pensions has revealed.
The research, which aimed to gauge how people are planning for retirement, showed that while most people had started saving for retirement, a significant minority had not.
The DWP noted that in general, many people have low levels of engagement with their pensions.
Of the 2,655 40 to 75 year olds included in the survey, 16 per cent had not yet started saving for retirement at all.
Not being able to afford to make contributions was the most common reason given for this (cited by 53 per cent of people without a pension).
Among the proportion that had started saving, knowledge of how much income they would have in retirement was low. Only 23 per cent said they had a “very good idea” of what they had accumulated.
The DWP said: “The question of whether and how people are planning for retirement is becoming ever more important as people live longer and have greater freedom over when and how they retire and take their pensions.”
The research also sought to find out what would make it easier for people to continue working later in life and identified flexibility as the key factor.
As it stands, 14 per cent of those aged 66-70 remain in employment, along with 5 per cent of those over 70 years of age.
Proportion of 40-75 year olds in paid work, by age
Source: Planning and Preparing for Later Life 2020/21
Base: All respondents (n=2,655)
Most respondents (62 per cent) who had not yet reached retirement said they planned to work beyond their ideal retirement age, with the consensus being that the ability to work flexibly with fewer hours would support them in achieving this.
Equity release rises in popularity
Elsewhere in the research the DWP noted that people may be relying too heavily on sources other than pensions to fund their retirement.
Nearly half (45 per cent) of all private pension holders expected less than half of their retirement income to come from their private pensions.
The rise in popularity of equity release in particular, as a means of funding retirement, was evident in the results.
FTAdviser has previously reported on concerns around the quality of advice given to people releasing equity from their homes to fund their retirement.
Research from the Lang Cat earlier this year showed an annual shortfall in pensioners’ income in the UK of £48bn in 2020 and 2021.
At the time, experts said consumers would likely look to equity release to make up the gap.
The research released by the DWP showed that 26 per cent of non-retirees said they would use equity release to fund their later life, compared to 6 per cent of current retirees.
Commenting on the DWP research, equity release provider Key’s chief executive, Will Hale said it was “entirely understandable” that the department would be concerned about people relying too heavily on sources other than pensions to fund their retirement.