Workers should double the amount they are saving into their occupational pension schemes, a two-year review for the Labour Party has concluded
The Independent Review of Retirement Income (IRRI) suggests the target for savings should be 15% of salary.
That is a considerably higher level than has been suggested previously.
At the moment the average worker puts just 4.7% of pay into a pension – with most employers making a further contribution of less than 4%.
“To get a decent-sized pension pot for retirement, it is necessary to make adequate pension contributions – something of the order of 15% of pensionable salary,” wrote Professor David Blake, director of the Pensions Institute at Cass Business School, in the 588 page report.
The review was set up by the Labour Party, following the government’s announcement of planned pension freedoms in the 2014 budget.
On Tuesday the government confirmed that there will be a review of the state pension age. It will report in May 2017, and will be headed by John Cridland, the former director general of the CBI.
The review could mean people joining the workforce today will have to wait until their mid-70s before they retire, experts have warned.
Those under the age of about 55 will be affected by the shake-up, which will consider what the state retirement age should be from April 2028.
Employees taking part in the government’s auto enrolment programme will eventually see 8% of their salaries going in to a pension.
Employers will be obliged to make a 5% minimum contribution, and workers a 3% contribution.
The average UK pension pot on retirement is worth around £28,000, according to the Tax Incentivised Savings Association (Tisa).
However, Tisa has suggested that households should aim to have savings of £230,000 for workers to retire on two-thirds of their previous income.
Two-thirds income is known as the “gold standard” of pensions. Half income is said to be the “silver standard.”
While welcoming most of Professor Blake’s conclusions, some industry experts said savings levels needed to be tailored to individual circumstances.
Conventional wisdom suggests lower-paid workers need to save a higher proportion of their wages than better-paid workers.