Poverty in retirement could be drastically reduced if minimum work pension contributions were boosted, a new report finds.

Some 12.2 million people or nearly a third of adults face hardship in later life on current forecasts.

That is the number of people heading for an income of less than the Pensions UK benchmark for a basic standard of living – £13,400 if you are single or £21,600 for a couple. The figures do not account for income tax, housing or care costs.

However, just 13 per cent of people would undershoot these retirement income levels if the auto enrolment pension saving rate was raised to 12 per cent and applied to total salaries, according to a study by Scottish Widows.

At present, people auto enrolled into work pensions save at minimum 8 per cent of a certain portion of their salary – their total earnings between £6,240 and £50,270 a year before tax.

Workers put in 4 per cent, employers 3 per cent, and the Government 1 per cent via tax relief.

However, many employers are more generous and pay in above the 3 per cent minimum, especially if you voluntarily increase your own contributions.

‘Automatic enrolment is an important tool to help more people have at least a basic lifestyle in retirement, especially for those on low to middle incomes,’ says Scottish Widows.

‘The remaining 13 per cent at risk of pension poverty are mainly self-employed, part-time or unemployed people.’

The firm’s report also recommends creating a similar ‘auto-saving’ system suitable for self-employed people, to raise their chances of a decent retirement.

Scottish Widows’ annual national retirement forecast assesses people’s future income prospects based on savings, behaviour and income sources, plus future living and housing costs.

Its latest report detected a positive trend, with the percentage of adults facing retirement poverty heading downwards, from 39 per cent last year to 31 per cent.

Scottish Widows explains: ‘Those not saving in the traditional way through a pension have increased their level of savings elsewhere, and more of those also now expect to own their own home when they retire.

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