The average Briton needs to contribute an additional £51,000 into their private pension to ensure a comfortable standard of living in retirement.
Market analyst Datamonitor has calculated that the average occupational pension scheme member in the UK has only £30,000 in their pension pot, far too little for a comfortable retirement.
Datamonitor said that if people did not make up the shortfall, they would find themselves living on £13,000 a year after retirement, taking into account the money paid by the basic state pension and state second pension.
The extra £51,000 would give pensioners an additional £4,000 income a year.
According to Datamonitor's pensions analyst Oliver Guirdham, government policies have only contributed to the UK's £27 billion pensions shortfall.
"For many people there is still time to adjust. UK citizens have built up relatively large private pensions savings relative to many European countries, however there is still the need for more, and the government needs to help them do this."
Initiatives such as the stakeholder pension have largely failed, he added, while the government’s removal of tax credits from pension schemes have created disincentives against saving and contributed to a 5 billion a year reduction in savings.
But despite the shortfall, the UK still has by far the largest private pensions market in Europe. At the end of 2003, private pension funds in the UK were estimated to be worth Eur1900 billion (£1297 billion) last year. Only the Netherlands comes close at Eur500 billion (£341 billion).
Yet despite paltry retirement savings – the average French worker has a mere Eur 1,000 (£683) of pensions saving and the average Italian only Eur 3,000 (£2,049)
- many Europeans still get paid up to 80 per cent of their working salaries in retirement.
Unsurprisingly, Oliver Guirdham believes that this is simply unsustainable in the long term, particularly in countries such as Spain and Italy where the population is aging the most rapidly:
"This means that the strain on workers to pay for the retired will become unbearable in the next 20 years. The problem is that the governments of these countries have not found the political will to make the necessary reforms to their pensions systems.
"If they do not do so they will face a crisis," he warned.
Earlier this week, Professor Richard Blundell, of the Institute of Fiscal Studies, told the British Association Festival of Science that middle income earners in Briton face a bleak future because so many of them had private pensions that depended on the health of the stock market.
“For the middle income group, for nearly all of them the financial pressures make it the case that they are likely to save more and retire later in order to maintain their incomes in retirement,” Prof Blundell said.
Meanwhile, the Pensions Policy Institute has repeated its call for the government to make fundamental changes to simplify the current maze of means-tested benefits and introduce a single, more generous pension.
The Institute said this could either be done by increasing the amount of income people received from the basic state pension or reforming the system to a Citizen's Pension, with entitlement based on residency, rather than National Insurance contributions.