The picture is likely to deteriorate further due to a drop in contribution levels, from 4.6% to 4.2% this year.
"The impact on individual members is significant, especially for those about to retire," says Mercer's Tony Pugh. "Members should keep a close eye on how their pension pot is invested and make sure to shop around for annuities to get the best out of their retirement savings. Those eligible are likely to increasingly use drawdown options, but these are not without downside risk as investment values could fall."
Although Mercer's calculations show that someone nearing retirement may need to work for more than three years longer, it's also bad for younger people - they're looking at an even bigger potential shortfall.
Time on your side?Admittedly younger people have more time - possibly - to hike contributions if they're able, but then they're also racing against inflation. Mercer thinks salaries will rise by only 3% in the next year – less than the projected rate of inflation.
Mercer doesn't break down the figures by gender, but I would have thought the impact of the cuts will have seen women's pension contributions fall even further. Next year all UK employers will be obliged to automatically enroll staff into a workplace pension scheme (but inevitably some will opt out).
Savers also hitFor savers, it's just as grim. To beat inflation, a basic rate taxpayer at 20% needs to find a savings account paying 6% per annum, while a higher rate taxpayer at 40% needs to find an account paying at least 8%, claims Moneyfacts.co.uk.
The effect of inflation on savings means that £10,000 invested five years ago, allowing for average interest and taxed at 20%, would now have the spending power of just £9,210 today.