An extra 1.2m people are facing a worse retirement lifestyle than in 2023, according to the annual retirement report from Scottish Widows.

It means millions may delay their retirement as the UK pension savings gap widens, the firm warned.

The percentage of people not on track for even a minimum retirement lifestyle income - based on PLSA figures - has climbed from 35% to 38% in the last year, according to the report.

The report found that most people would like retire at 62, but 54% think they will have to work longer than they would like, on average by seven years. Some 27% don’t feel they will ever be able to retire.

The State Pension plays a vital role in meeting day-to-day costs for 75% of current retirees, according to the research, but more than one in 10 (12%) of future retirees are worried it may not be there to benefit them.

The 20th annual retirement report also showed that younger people would like to retire even earlier. Those aged 18-29 wanted to retire at 61 and were only prepared to work until they reached 64 if necessary - at least three years short of the age at which they will be able to access their state pension.

Only a third (34%) of respondents think they are currently preparing adequately for retirement and 38% are not on track for what the Pensions and Lifetime Savings Association deems as a minimum adequate retirement lifestyle.

The increase in those projected to suffer the poorest retirement outcomes has been driven by rises in the cost of living (for example rents which have gone up by 15%) relative to the growth in wages at an average of just 6.2%.

Pete Glancy, head of pensions policy at Scottish Widows, said: “The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern.  

“However, people are starting to think about how their private pension pot might interact with their state pension entitlement to plan their retirement. But, there is still a real reliance on the State Pension.”

He predicted it was likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for.

For that reason, he said, helping people to make the very most of what they have is going to be critical.

He said: “It’s the right moment for the new government to take a holistic view on people’s financial resilience throughout life, paying particular attention to those whose retirement outcomes are predicted to be much lower.”

He pointed out that at present only the wealthiest tend to rely on professional support from a qualified financial adviser. “As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.” 

• The research was conducted online by YouGov with 5,072 nationally representative adults aged 18+ in the UK between 21 March and 5 April.