14 million face 'relying on DWP and HMRC support' due to £100,000 pension gap

UK households have been warned they will have to rely on Department for Work and Pensions (DWP) and HMRC support in retirement - as auto-enrolment sees millions having to plug a £100,000 pension gap. 14 million people are not on track for their expected retirement income, with many facing a savings gap of more than £100,000, new research shows.

71 per cent of adults agree that the government should set out a plan to increase the minimum auto-enrolment pension contribution rate if it’s too low for most people to achieve an income they could live off in retirement, new research from Phoenix Group found.

Catherine Foot, Director of Phoenix Insights, Phoenix Group’s longevity think tank said: "Auto-enrolment has been successful in kick-starting pension saving for millions of people, but the current minimum contribution rate is too low for most savers to achieve an adequate retirement income and may be giving some a false sense of security."

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Around 14 million people, or half of defined contribution pension savers, are not on track for their expected retirement income. Those who have not saved enough will not just be slightly off track, over two thirds (68 per cent) of this group face a savings gap of more than £100,000.

Ms Foot went on: "We need a government plan to increase contributions and help address the pension saving gap, as part of a wider review of the pension system to ensure it is helping people to save enough and be more financially secure over the long-term.

“Delays and inaction on this could leave generations of future retirees unable to enjoy the lifestyle they hoped for when they retire or struggling financially, with millions more relying on state support later in life.”

Gail Izat, managing director for workplace pensions at Standard Life, part of Phoenix Group said: “More needs to be done to help people secure a decent standard of living in retirement, and raising minimum contributions is the single most powerful mechanism available.

"While it’s important that we move when the time’s right for both savers and employers, prolonged inaction risks continued under-saving and the UK sleepwalking into a retirement savings crisis. It’s clear that people support action on raising minimum contributions if the current rate isn’t adequate, and we urge the next government to put a review in place.”