"The government must do more to extend pension coverage and ensure that contributions towards private schemes are sufficient,"
Its report says that low investment returns and interest rates, sluggish economic and wage growth and the gradual decline of DB schemes means those entering the workforce today will face a "hostile economic environment".
As a result, workers will need to save 18% of their earnings each year to achieve an adequate income in retirement and 20% to match the income adequacy enjoyed by current retirees.
Currently, only 12.4% of people in the UK are saving more than 15% of earnings and over 30% of people between the ages of 25-44 make no savings whatsoever.
ILC-UK says that as a solution, auto-escalation is a potential policy option, which would automatically raise pension contributions unless the individual chooses actively not to.
Dean Hochlaf from ILC-UK said: “The combination of persistently low returns, sluggish wage growth and a changing labour market means today’s young people will need to save more to enjoy their retirement. The government must do more to extend pension coverage and ensure that contributions towards private schemes are sufficient, especially amongst overlooked groups such as the self-employed and those on low incomes who have yet to benefit from initiatives designed to improve private savings”.
Vince Smith-Hughes, retirement income expert at Prudential, added: “As the ILC-UK analysis shows, action is needed now to further embed pension saving in to our workplace culture so that all, but in particular the younger, generations can look forward to a comfortable retirement.
“It’s long been our view that for most people, saving as much as possible as early as possible in their working life is the best way to ensure they have control over their financial futures and are well-prepared for a comfortable retirement."
