A generation of "private pension paupers" is on the horizon if pension contribution levels do not increase, Fidelity International has warned.
Research from the pension provider has revealed the typical UK worker is set to retire on a pension below the current minimum wage.
Fidelity’s annual retirement index has shown the average UK household can expect its income to fall by 53pc in retirement.
The asset manager said average weekly wage in the UK is £457, so a 53pc decrease will equate to a retirement income of £215 per week – including state pension benefits and savings.
Fidelity’s research also highlights the future for those who are in defined benefit schemes and for workers who are in defined contribution plans.
Members of final salary can expect to retire on two-thirds of pay after 40 years of service. However workers in dc schemes, where retirement income is tied to contribution levels and investment performance, are on course for just 38pc of salary in retirement – less than £174 per week for someone on average earnings.
Fidelity International retirement institute president Simon Fraser said: "It is a shocking thought that, if this is not corrected, we could see the emergence of a generation of private pension paupers."
© Incisive Media Ltd. 2008
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