Over a third of UK workers, 34 per cent, risk being unable to cover their basic needs in retirement, new research from Scottish Widows indicates.
A "national retirement forecast" model, developed by Scottish Widows and Frontier Economics, estimated potential incomes for those aged 22 to 65, based on savings and spending.
Part-time workers are particularly vulnerable, with many earning below the £10,000 threshold for automatic enrolment into workplace pensions, leaving them unable to cover basic needs.
Scottish Widows attributed this to a need for increased minimum contribution rates and widespread pension knowledge gaps, hindering an adequate retirement pot.
The study analysed views from 1,000 senior pension decision-makers and 2,000 employees across various sectors.
Over a third (38 per cent) of employees have little to no understanding of the pension-related benefits their employer offers, the report found.
But more than two-fifths (45 per cent) of firms surveyed said they provide regular information and support to help employees make informed pension decisions.
Around 41 per cent of firms surveyed said they take an active role in educating employees to engage with their pension, with bigger firms particularly likely to do this.
But even for employees in bigger firms, understanding remains low, the report indicated, with 38 per cent of those working for big businesses having little to no understanding, rising to 41 per cent in small firms and dropping to 36 per cent in those medium sized businesses.
More than one in 10 (11 per cent) firms said their employees are not engaged with their pensions, rising to 20 per cent in small firms with 10 to 49 employees.
Graeme Bold, managing director of workplace and intermediary wealth at Scottish Widows, said: “A workplace pension can be the most powerful tool people have to shape their financial future, but low engagement is holding people back from taking their best shot at long-term saving.”
He said that pension apps, connecting financial products in one place and using “gamified” tools can help people to engage with their pension.
He added: “There’s a broader opportunity for pension providers, employers and those managing employee wellbeing to help them make the most of this workplace benefit.”
The modelling in the report took into account various sources of retirement income, including the state pension, private pensions, other long-term savings, and inheritance.
It compared the retirement income people are on track for to the costs they could face living expenses for different retirement living standards defined by Pensions UK, and housing costs for those who expect to rent or continue to pay off a mortgage in retirement.
The employer survey was carried out online by Opinium Research across 1,000 senior decision makers with at least joint responsibility over pension schemes within their organisation.
Organisations had at least 10 employees.
The employee survey was also carried out online by Opinium Research, among 2,000 employees across the UK at businesses with 10 or more employees.
Both surveys were carried out between July and August.
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