People are failing to put enough in their pensions, plain and simple, Phoenix Group chief investment officer Mike Eakins has warned.
“The reality is that people today are not saving enough,” the chief at the long-term savings firm said.
“We need to get contribution rates higher. And we also need to increase the returns that they will get to make the pension pots bigger.”
Many households face a shock when going to retire later in life as a result, he added.
Eakins called for British pension funds to place more in the likes of infrastructure, housing and start-ups, to boost returns.
This echoes the sentiment of Jeremy Hunt who, in last month’s autumn statement, unveiled plans to encourage further investment in UK business from funds holding savings.
Commenting on this year’s Institute for Fiscal Studies report, which showed nine in 10 middle-income earners put less than 15% of their salaries in pensions, Eakins said: “It’s a staggering statistic.”
That is, recommendations from Lord Turner’s Pension Commission, which ran from 2002 to 2006, were for people to keep 15% of annual earnings aside for later life.
However, some 3.5m private sector employees were found to not pay anything into pensions in a given year by the institute.
Of those that did, almost two-thirds saved less than 8% of their incomes in pension pots.
“At the moment there is a material shortfall between what they’re saving and what their expectation is,” Eakins added, “it is really stark".