Having leaped from £150,000 to £260,000 in just 15 years, there is every likelihood that the ‘pension mountain' figure will go even higher, as younger generations face up to the challenge of failing to afford a house whilst employed and have to deal with rental costs in retirement.
Meanwhile, research by Loughborough University and the Pensions and Lifetime Savings association (PLSA) identified three types of retirement income - minimum living, moderate and comfortable - that require significantly different levels of savings during an individuals working life if they are to be achieved. Individuals who manage to save enough for a retirement income of £10,200 a year (£15,700 for couples) will be able to achieve what it calls a minimum living standard which includes £38 on a food shop and a UK holiday but no car.
Those who are able to save enough for £20,200 a year (£29,100 for couples) will be able to live a moderate lifestyle afford two weeks in Europe alongside a higher weekly food and annual clothing budget. At the higher end, those saving enough for £33,000 a year (£47,500 for couples) will be able to enjoy a comfortable retirement that includes holidays abroad each year, a generous clothing budget and a car.
But investing at a low rate for the long term often means your returns are unlikely to outgrow inflation, and therefore your pension pot will be much lower than needed at retirement.
In addition, lump sums parked in a low-interest bank account do not generate much annual interest, and thus more people could be looking at a 'minimum' or 'moderate' income rather than comfortable.
Meanwhile, there has been a continued increase in life expectancy. Matching this increase in life expectancy with an appropriate retirement plan is not easy; with pension values translating to a lower level of income than many expect there is a risk that retirees could outlive their savings. For all of these reasons, investors cannot afford to be complacent about current levels of retirement saving.
So what is the answer to this growing challenge?
Click here to access the full article in the exclusive guide from Architas, Choosing a Retirement Game Plan