The Fidelity Retirement Index, commissioned by Fidelity International, warns that unless saving habits change, the average person can expect a 60 per cent fall in income after retirement.
With the average salary standing at £22,900, someone retiring tomorrow could therefore expect a weekly pre-tax income of just £185 – less than what they would receive for working 40 hours at the minimum wage.
Simon Fraser from Fidelity International warned that retirees risk living off “meagre” state benefits, calling on workers, employers, the government and the financial services industry to work together for change.
“We all know that more people have to save more. But we also must acknowledge that the industry and government can do more to help people to save not just more, but to save in the right way,” he said.
“Defined contribution pensions are not inherently flawed but the implementation of many schemes falls far short of ideal practice, with auto-enrolment and generous contribution the minimum requirements for such schemes.”
The report revealed that people with defined contribution pension plans could expect a significant drop in income, receiving just 38 per cent of their final salary, compared to 81 per cent for those with a defined benefit scheme.