The number of working people who believe they will never be able to afford to retire is on the rise, according to research by Wealth at Work, with the increased cost of living cited as a key factor.

The research found that almost half (45 per cent) of workers claimed they would never be able to afford to retire, up from two-fifths (39 per cent) twelve months ago and a third (33 per cent) in 2023.

Workers aged 35-44 were the age group most likely to believe they would never be able to afford to retire, with over half (51 per cent) of these workers expressing this concern.

The majority (81 per cent) of those surveyed were also concerned that the increased cost of living would make them less comfortable in retirement due to a shortfall in pension savings.

Indeed, 80 per cent said they were concerned they would have to work longer to compensate, while almost a third (32 per cent) said they would look to delay retirement.

Wealth at Work director, Jonathan Watts-Lay, said workers aged 35-44 would not have benefited from a full working life of automatic enrolment and were less likely to retire with generous defined benefit (DB) pensions than some older generations.

“Pre-auto-enrolment, many in this age group may not have saved into pensions at all, therefore missing several years of contributions and growth,” he explained.

Watts-Lay said this proved that it was “vital” that people engaged with their pensions as early as possible.

“Many don’t realise the significant difference a small increase to their pension savings can make,” he added.

The research also examined workers' understanding of pensions, revealing that many are still lacking knowledge in key areas of pensions.

In particular, it found that 21 per cent were unaware that their pension was invested, 30 per cent were unaware that their pension had a choice of investment funds, and 38 per cent were unaware that their pension had a choice of investment funds, which increased to 38 per cent for those over 55.

In addition, 39 per cent were unaware of what their pension was invested in, and 25 per cent were unaware that if they didn’t choose what their pension was invested in, their pension provider would automatically do it for them.

Meanwhile, over half of workers (54 per cent) have considered choosing pension investments based on their values and beliefs, yet only a quarter (24 per cent) have done so.

Watts-Lay stressed that it was “really important” that people were educated about their choices and could make informed decisions to make the most of their retirement savings.

“What is particularly concerning is that almost two-fifths of those approaching retirement were unaware they have a choice of investment funds," he continued.

“At this point in their life, people need to start considering how they plan to generate a retirement income and ensure their pension investments or ‘glide path’ is aligned with this.”

Watts-Lay argued that for people to achieve better outcomes at retirement, they needed support to understand their pensions and general finances, including ways to save and invest money, budget, and manage debt.

“This could include financial education and guidance programmes, access to savings such as Workplace ISAs, pension consolidation services to help people manage their pension savings effectively, and access to investment advice," he continued.

“Taking an active approach and supporting employees with the help of reputable firms will make the whole process far more robust and will lead to more positive outcomes for all."

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