Scottish Widows, an Institute of Financial Planning corporate member, surveyed over 5,000 people for its ninth annual pensions report.
Only 45 per cent of people were saving adequately for retirement, 20 per cent were saving nothing at all and more than a third were 'undersaving' somewhat or severely.
'Saving adequately' was defined as people saving at least 12 per cent of their income or expecting their main income to come from a defined benefit pension.
Research found the average amount people expected to need for a comfortable retirement was £25,200. This is an increase from 2011 when people needed £24,500.
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However, savers have failed to increase their funds proportionally with total savings dropping to £122,000, giving them £3,860 a year in retirement. When the State Pension was added, the total rose to £11,400 but this remained significantly below what people were expecting.
Most priority over the past five years was given to paying for living expenses and paying off debts and mortgages. Scottish Widows also found more retirees are entering retirement with outstanding debts on mortgages and credit cards. The average amount owed was £5,682.
Ian Naismith said: "People are now less prepared for retirement than at the height of the downturn a few years ago, yet expectations for income in retirement are still increasing.
"To meet these aspirations, an average saver would need to save £12,000 a year or £1,000 a month. As a nation we must either prioritise saving for the future and prepare accordingly, or seriously adjust our outlook for old age."

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