It also showed that 12% of savers (4.1 million people) will have a pension that falls below the minimum standards set out by the Pensions and Lifetime Savings Association’s (PLSA).

Just over 17 million workers (51%) will have a pension below the PLSA’s standard for a moderate income. More than 30 million (88%) of workers will have a pension below the PLSA’s standard for a ‘comfortable’ retirement.

Lower earners are more likely to be under saving for their retirement and 35% will not reach a minimum retirement standard compared to 3% of top earners.

The stark warning comes from the Department of Work and Pensions (DWP) which says that although more people are saving into pensions, the amounts being put away are not enough.

Since the introduction of auto enrolment, pension participation in the private sector has risen from 41% in 2012 to 86% in 2021.

It comes as research shows that savers don’t increase their pension contributions when they get a pay rise or pay off their mortgage.

Not the time for a rise to contributions

Experts in the pensions industry agree that now, in the middle of a cost-of-living crisis, is not the time to increase automatic pension contributions, but that the Government needs to address the issue of under saving now and not delay it.

Increasing minimum pension contributions with salary increases and lowering the age threshold for auto enrolment have both been proposed.

Tom Selby, head of retirement policy at AJ Bell, said: “With living costs surging for millions of households, now is not the time to hike people’s auto-enrolment pension contributions. But that does not mean policymakers should not set out a long-term trajectory to get people saving more.

“There are various interesting ideas out there, including ‘save more tomorrow’, where contributions rise automatically in line with pay increases, and exploring ways to link contribution rises to certain life events. But the longer we delay addressing this pensions adequacy challenge, the bigger it becomes.”

Jon Greer, head of retirement policy at Quilter, said: “Likely due to the cost-of-living crisis, the DWP earlier this year opted to keep the Automatic Enrolment earnings trigger, the point at which an individual’s salary opts them in for automatic enrolment to their workplace pension scheme, at £10,000.

“Additionally, the DWP chose to freeze the lower earnings limit, the point from which an individual’s earnings are used to calculate the amount of pension contributions that will be paid into a scheme, at £6,240.

“All this is understandable given the state of people’s finances at the moment, but we need to act sooner rather than later and help people save more for their retirement by implementing some of the proposals surrounding Automatic Enrolment that were put forward in the Government’s 2017 review. These included lowering the age threshold for Automatic Enrolment from 22 to 18 and looking at the qualifying earnings band.”