The average saver in their twenties is in line for an average annual pension shortfall of £6,500, according to research from Scottish Widows.

Its The Future of Retirement report found that the average saver in their 20s expects to require £25,000 a year for a comfortable retirement, but, at current savings rates, the average pension would only provide an annual income of £18,500.

The gap was even wider for ‘disengaged’ savers, who do not know how much they are saving, as they would receive £13,000 per year at current saving rates, creating a discrepancy of £12,000.

In its report, Scottish Widows recommended increasing minimum contribution rates to help bridge the gap for disengaged savers, who make up 38 per cent of the population.

Savers with below average income face a slightly smaller gap between expectancies and reality, as they expect to need £17,500 per year for a comfortable retirement, while their projected income is £14,000, a gap of £3,200.

Commenting on the findings, Scottish Widows head of policy, Pete Glancy, said: “Automatic enrolment is improving the retirement prospects for many, but those who fail to save beyond the default requirements of the scheme will be faced with a significant income gap.

“The first step in closing this gap is acknowledging the interlocking challenges faced by different groups, from the self-employed through to those who simply don’t know how much they are saving.”

The report also noted that the savings gap between employees and the self-employed has worsened as a result of auto-enrolment, with just 32 per cent of self-employed people between the ages of 20 and 39 are adequately saving for retirement and 41 per cent not saving at all.

While their income expectations for later life are slightly lower than average, they’re still set to experience a sizeable annual shortfall of £5,000 by the time they reach retirement.

Glancy added: “We need to see reform for the self-employed on a par with automatic enrolment and the introduction of new minimum and default contribution levels to address the issue of the disengaged generation.”

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