Almost 12 million people are failing to save enough for their retirement, the government has warned. In a wide-ranging new report on pensions, it says 11.9 million individuals are "saving too little", but could get back on the right track with only "modest changes".
Pensions minister Steve Webb said that, of the 11.9 million, almost half are at least 80% of the way towards achieving their retirement income target, while only 8% are less than 50% of the way there.
"While the state will always provide a decent safety net so people can get by, anyone wanting to see their standard of living maintained into old age needs to make their own provision too," Webb explained.
"This new research shows that by saving just a little more, a huge number of working people could make their future retirement so much more comfortable."
Webb said that people are under-saving due to three main reasons. Some do not have a full work history, meaning they miss out on years' worth of contributions to workplace pensions as well as National Insurance contributions that count towards the State pension.
Many people fail to contribute to private pensions while they are in work, and those that do are not saving enough in private pensions.
In March, chancellor George Osborne announced that the government would give retirees far more flexibility with their pension from April 2015, including no longer having to purchase an annuity. Instead they will be free to take their funds as a lump sum, use income drawdown or go down the annuity route. Or a mixture of the above.
Webb said this will help to boost pension saving. The government research also looked at tweaking the contribution rates on workplace pensions. Under auto-enrolment, which was introduced in October 2012, the statutory minimum workplace pension contribution rate is 8% (including a minimum of 3% from the employer). The government researched raising the minimum to 12% or 15%.
At 12%, it found that 600,000 fewer people would be under-saving, while at 15% 1.1 million fewer people would be under-saving. But the government acknowledged that if it raises the minimum contribution rate by too much, lower-earners might be forced to opt out of workplace schemes entirely.
Patrick Connolly, a certified financial planner at IFA Chase de Vere, said: "Although it may seem like a long way off, the sooner you start saving the easier it will be to give yourself a more comfortable lifestyle in retirement. Even if you cannot afford to save much initially it is better to do something than nothing.
"Make sure you've joined your company pension scheme. Most company schemes provide good value, especially if your employer also contributes on your behalf, as all employers will need to do shortly as auto enrolment is rolled out fully."