More than a third of UK workers - equivalent to around 11.6 million people - are on course to fall short of covering their basic needs in retirement, research from Scottish Widows has revealed.

The insurer’s latest report, Retirement Realities: Unlocking the Workplace Benefits, found that while auto-enrolment has brought millions into pension saving, contribution levels and engagement remained far too low to deliver adequate outcomes for most workers.

Drawing on surveys of 1,000 senior decision-makers responsible for workplace pensions and 2,000 employees, the report found that 34 per cent of the UK workforce were at risk of failing to meet a minimum retirement income, while one in five (20 per cent) full-time workers were still expected to face poverty in later life despite active participation in a pension scheme.

The outlook is even worse for part-time workers, with a third (34 per cent) earning below the £10,000 threshold for automatic enrolment and therefore missing out on employer contributions.

According to Scottish Widows’ National Retirement Forecast (NRF) model, a minimum retirement lifestyle for a single person outside London would require £13,400 per year in today’s money, excluding housing costs.

On average, workplace pensions are expected to provide 63 per cent of total retirement income, underscoring their central role in financial security in later life.

Despite this, more than a third (38 per cent) of employees said they have little or no understanding of the pension benefits their employer offers.

This knowledge gap persisted even though 45 per cent of firms provided regular information on pensions and 41 per cent ran education initiatives - figures that rose to 47 per cent among larger employers.

However, even in big firms, engagement remained low: 38 per cent of employees in large companies had a limited understanding of their pension, compared with 41 per cent in small firms and 36 per cent in medium-sized businesses.

Across all organisations, one in 10 employers (11 per cent) said their staff were not engaged with their pension at all - a figure that doubled to 20 per cent in small companies.

Beyond individual outcomes, the research also uncovered a strong link between pension engagement and business performance.

Firms that actively educated and supported employees with their pensions were three times more likely to describe their financial performance as “very good” (64 per cent versus 18 per cent).

Similarly, 41 per cent of top-performing companies contributed at least 8 per cent of salary to pensions, compared with just 11 per cent that stuck to the 3 per cent minimum.

Nearly nine in 10 employers (88 per cent) said pension support contributed positively to their firm’s financial health, while 91 per cent believed good pension provision helped attract and retain staff.

Conversely, almost 29 per cent of employees dissatisfied with their pension benefits have already left or are considering leaving their jobs, citing uncompetitive provisions, poor communication, and limited accessibility.

Scottish Widows’ managing director of workplace and intermediary wealth, Graeme Bold, said the findings underscored both the human and business costs of poor engagement.

“A workplace pension can be the most powerful tool people have to shape their financial future - but too many employees simply aren’t engaging with it,” he warned.

Bold added that the UK’s lowest earners, especially part-time workers below the auto-enrolment threshold, risked being “left behind before retirement even begins”.

“Government and industry must work together to expand auto-enrolment and ensure lower earners are not excluded,” he argued.

“Increasing default contribution levels is also vital if we’re serious about preventing retirement poverty.”

Scottish Widows concluded that while auto-enrolment has been transformative, it was no longer enough on its own, stressing that raising contribution rates, improving financial education and closing the engagement gap would be key to ensuring future retirees can meet even their most basic needs.

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