The majority of DC savers who want to retain their current lifestyle in retirement will need to increase their pension contributions, according to Aegon.

The firm warned DC scheme members that minimum automatic enrolment contributions and the state pension will not amount to enough retirement income to match many people’s expectations.

The insurer has used figures from the government review of auto-enrolment in 2017 — which set out broad target replacement rates — to show how much more money most individuals will need to save.

The review showed that someone earning the average salary (around £27,000) would need a 67 per cent replacement rate to maintain their lifestyle from a pension pot of £303,900.

Calculating the monthly income individuals would need on top of the full state pension (£168.60 per week) to reach their replacement rates, Aegon said that a 22-year-old on average earnings (£27,000) would need to contribute an additional 4 per cent above the 8 per cent minimum combined contribution — or risk falling £106,500 short off the required savings.

A 35-year-old would need to contribute 13 per cent more, and a 45-year-old 29 per cent more. Aegon said that its calculations assume that individuals are just being auto-enrolled and have no existing pension pot.

Aegon pensions director, Steven Cameron, explained that maintaining lifestyle throughout retirement years would not be possible for many workers at present if they are simply auto-enrolled into a pension scheme on the minimum contribution levels.

“Someone earning £27,000 should be aiming for an annual income in retirement of around £18,000 in today’s money to maintain their lifestyle,” he said.

“While the state pension will on current terms provide around £8,767 of this, and being automatically enrolled will also produce a valuable fund, they still face a major shortfall and the longer people wait to address this, the harder it is to catch up.”

Although the required extra contributions look daunting, Cameron said that it was important to remember that some employers will match any additional employee contributions.

When taken into account with tax relief on employee contributions, this could mean that it can cost as little as 1.6 per cent from take home pay to have 4 per cent paid into a pension.

“The best chance of getting close to maintaining your lifestyle in retirement is to start paying more than the automatic minimum from as early as possible,” he advised.

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