New research from Aegon has revealed that just 7% of us are on track for the retirement we want.
The UK Readiness Report found that nearly two thirds of people do not feel confident about being able to retire when they want to. Most people want to retire at 63 with an annual income of £42,000, but to achieve that you would need pension savings of more than £1 million, which is more than the new pension lifetime allowance.
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This lack of preparation is being addressed in part by the Government's auto-enrolment scheme, which forces employers to place their employees in a pension scheme, and contribute to it.
However, there is some way to go in ensuring people are actually aware of how the scheme works.
According to the report, 41% of employees don't know how much of their salary is being saving into their pension pot and 59% have no idea how much their employer is contributing to their retirement savings. Even more worryingly 35% of people in employment don't know if they are eligible to be auto-enrolled into a company pension.
Of those that do have pension savings, over half have never checked the performance of their pensions and, as a result, have no idea if they are on track to meet their retirement needs.
It's not all bad news
The report did bring some good news alongside the bad though.
The Government's aim to increase pension saving with auto-enrolment is working. Of those surveyed 79% intend for their workplace pension to be their main source of retirement income. Just 6% of people say they are planning to leave their pension scheme when the minimum contributions rise to 5% in 2018 (they are currently 1%).
In fact, a fifth of people say they will increase the amount they are saving above the minimum requirement.
Realistic pension hopes
Another revelation from the report is people's unrealistic expectations of how much they want to live on in retirement. The survey found most people wanted an incredibly high annual income of £42,000 in retirement.
"When planning for retirement it's important to have realistic targets including how much you'll actually need to live on," said Patrick Connolly, a certified financial planner with Chase de Vere. "Most people won't need an income of £42,000 each year as their mortgage will hopefully be paid off, their children should be financially independent, they won't have to pay into pensions and they'll be paying less tax."
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