With the government carrying out a review of the state pension age, research from Royal London says an average earner who starts saving for an occupational pension at 22, and makes the minimum statutory contributions, would need to work until 77 if they want the sort of “gold standard” pension enjoyed by their parents.
Royal London defines this “gold standard”, which includes the state pension, as two thirds of pre-retirement income.
For those living in high-income areas, such as Westminster and Wandsworth in London, achieving a pension pot of this size would take till 80 or 81, assuming contributions are not increased.
At the same time, a review for the Labour party has concluded that employees should double their contributions to workplace schemes, with a target of 15 per cent of earnings going into pension pots.
Traditionally, the state pension age was 65 for men and 60 for women. This is being equalised and in two years’ time it is due to rise, reaching 67 by 2028.
This could rise again as a result of a government review, amid warnings that those starting work today could have to wait until their mid-1970s before they receive a state pension.
Royal London’s research shows that how much people need to save in occupational schemes, if they want a “gold standard” pension, varies according to where they live.
While someone in Westminster who makes minimum monthly contributions would have to wait till they are 81, a worker in Boston, Lincolnshire, where incomes are lower, would build up a big enough pot by 73.
Ages for Scotland, Wales and Northern Ireland are 77, 76 and 76 respectively.
Former pensions minister Steve Webb, who is director of policy at Royal London, said: “It is great news that millions more workers are being enrolled into workplace pensions, but the amounts going in are simply not enough to give people the kind of retirement they would want for themselves, and certainly not the sort of pensions that many of those retiring now are enjoying.
“Even in lower wage areas, people face working into their early seventies to get a comfortable retirement. In higher wage areas, the state pension makes a much smaller contribution, so workers in those areas face working well into their seventies.”
Mr Webb said the answer was to start saving early and increase pension contributions.