Each year of retirement is funded by less than two years of work, and with some pensioners needing to fund 30 years of retirement, the balance needs to be restored, says Aviva.
Those who start their working lives today could find that they are retired for almost as long as they work, and Aviva's Real Retirement Report has revealed the importance of starting to save for retirement as soon as possible.
The average person who is 55 today will live to be 88, typically retiring at 63, and with an average 44 years in work and a 25 year retirement, each year of retirement for today's 17.6 million over 55s will be funded by two years of work, and the trend of increasing longevity will reveal a significant shortfall in retirement funding.
Furthermore, this situation will only get worse if the retirement savings shortfall continues, as life expectancy continues to increase, and people start working and saving for retirement later and later.
Aviva warns those who are hoping to retire at 60 as their parents may have done that by the time they reach retirement they might need to be funding each year of retirement with one year of work.
With the Government leaning more towards self-funding of retirement, and companies offering less attractive pension schemes, Aviva worries that this does not bode well for future generations.
Commenting on the findings of the report, Clive Bolton, ‘at retirement' director for Aviva, said of those over 55s who are concerned about maintaining their standard of living once they retire that their fears are justified.
"This financial equation is very worrying and simply doesn't add up!" he said. "Currently, the biggest income source for over 55s is the state pension but with longevity increasing, the Government has acknowledged that it will need to review the way it provides later life financing.
"All these factors highlight the simple fact that as a nation, we need to save more for retirement. With the high cost of living, we can't all afford to put substantial amounts away each month but even small amounts add up over the years and will help to ensure that retirement is not characterised by a struggle to survive on a tiny income."
© Fair Investment Company Ltd
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