Royal London said the average monthly expenditure of a pensioner will increase from £1,084 to £2,930 in the next 35 years.

The calculations are based on the Centre of Economics and Business Research (CEBR) figures on the future cost of essential items such as housing, food, heating and transport in 2050 based on current trends.

The findings mean an average 35 year old today, halfway to possible retirement in 2050, will need to build up a fund of at least £666,000 to secure a monthly income to maintain the same standard of living of today’s retirees.

The CEBR’s calculations did not consider any state pension income in their calculations, as Royal London’s own research suggests 40 per cent of under-40s believe the state pension will not exist by 2050.

The pensions and investment firm’s findings indicate 30-40 year olds today have an average pension pot of just £14,000, well short of the fund they require to secure a monthly income that will just cover the basic cost of essentials in 2050. Unless this group saves more, they could face impoverishment in retirement, the company said.

In more positive news, the research found that 60 per cent of 30-40s do have a pension in place, and 47 per cent of 18–29 year olds have started saving into a pension.

However, this still means 40 per cent of 30-40 year olds today do not have any pension provision in place.

“The scale of the challenge facing today’s 18-40 year olds is quite frightening – too few recognise their income may need to last over 20 years in retirement,” said Fiona Tait, pensions specialist at Royal London.

“Around 60 per cent have been auto-enrolled into a defined contribution scheme – this is good news, but the level of saving is still not adequate.  The research also shows people do trust pensions, which is one reason why Royal London has called for pensions with tax relief on contributions to continue to be the main source of people’s future long term savings, rather than ISA-style pensions.

“In addition, Royal London has called for pension tax relief to be at a single flat rate of 33 per cent for all, effectively one pound for every two pounds saved. We believe this is a fairer system that will help boost the savings of those who have the biggest savings shortfalls.”

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