More evidence of the pensions time bomb ticking under the UK has emerged with the release of new figures showing that only one in four people can expect to retire with a pension which is at least half as big as their final salary.
The JPMorgan Fleming Pension Map of Britain 2003 reveals that UK workers are seriously overestimating their financial futures, with six out of ten believing that they will have a comfortable retirement despite the fact that well under half (43 per cent) are actually making contributions into a pension scheme.
Over half of UK adults – 53 per cent - can now expect difficulty in retirement with an income of less than 40 per cent of their final salary, the report says.
At 26.5 per cent, the number of people in line for a comfortable retirement has fallen considerably from when the same research was carried out in 1996. The figure then was 43.2 per cent.
The report found that on average, people expected to have a pension worth nearly £19,000 in today's money, equivalent to 77 per cent of the average salary.
Simon Crinage, of JP Morgan Fleming, said: "The research paints a grim picture of pension provision in the UK, with the number of workers who can expect a comfortable retirement rapidly declining. But perhaps even more worrying is the mismatch between the financial reality and people's expectations."
“There are a number of factors that have influenced Britain’s deteriorating retirement provision, including falling equity markets, declining annuity rates and the closure of final salary pension schemes as employers have come under pressure to balance their pension assets and liabilities.”
Expectations varied around the UK, with the worst situation in the South West, where only one in five workers can expect to retire on at least 50 per cent of their final salary, compared with 35 per cent in Northern Ireland.
But the biggest change in circumstances has occurred in the South East of England, where the number of people set to have a comfortable retirement has plunged from 61 per cent in 1997 to just 26 per cent this year.
Mr Crinage said the only real solution to the UK's pensions problem was for people to save more, but the research found that 27 per cent of workers claim they don't have any spare money to put into a pension.
He said: "Until we see a reverse in Britain's debt burden, which has been fuelled by the housing boom and unsecured borrowing, and a concerted effort to educate consumers about the importance of long-term saving from an early age, the situation is only going to get worse."