Marvin Onumonu45% of workers believed they would never be able to afford to retire, according to research from WEALTH at work.
This was up from 39% last year and 33% in 2023.
Workers aged 35 to 44 were the most concerned, with 51% in this group saying they did not think they would ever be able to retire.
The majority (81%) were worried the higher cost of living would mean a less comfortable retirement because of a pension savings shortfall.
80% said they were concerned they would need to work longer, and 32% planned to delay retirement.
This rose to 35% among those aged 55 and over.
Jonathan Watts-Lay, director at WEALTH at work, said: “Workers are getting increasingly concerned that they’ll never be able to afford to retire, with the research finding this peaks for those aged 35-44.
“Most of this group will not have benefited from a full working life of automatic enrolment and are less likely to reach retirement with generous defined benefit (or final salary) pensions than some older generations.
“In fact, pre-auto-enrolment, many in this age group may not have saved into pensions at all, therefore missing a number of years of contributions and growth.”
Watts-Lay said it was vital for people to engage with their pensions early, and that small savings increases could make a significant difference.
Watts-Lay added: “For people to better prepare for their financial future, it’s vital that they engage with their pensions as early as possible.
“Many don’t realise the significant difference a small increase to their pension savings can make.
“For example, someone in their 20s, saving just 1% more each year into a workplace pension can boost future savings by 25%.”
He said: “This may not feel affordable but making small changes such as setting a household budget, shopping around and not auto-renewing on things like car insurance, as well as utilising workplace benefits i.e. discount schemes, really can make a huge difference when trying to find that bit of extra cash.”
Additionally, Watts-Lay said people nearing retirement should make a financial plan by reviewing their pensions, savings and investments, and working out how much they will need.
He noted this can be hard to estimate, but the Pensions and Lifetime Savings Association recently updated their guidance.
The new figures put the minimum retirement living standard at £13,400 per year for a single person and £21,600 for a couple, mainly due to lower energy prices.
The moderate standard has risen to £31,700 for one person and £43,900 for a couple, while the comfortable standard is now £43,900 for one person and £60,600 for a couple.
Watts-Lay said delaying retirement or working part time could help people build up savings.
He said: “If people find what they have saved isn’t going to be enough, it may be worth delaying retirement or continuing working part-time if able.
“Although this may not be a prospect many want to face, it would enable people to make more pension contributions whilst taking advantage of tax relief and employer contributions for longer and ultimately build up their savings for a more prosperous retirement.”
The research also looked at pension understanding, revealing that 21% did not know their pension was invested and 30% did not know they had a choice of investment funds, rising to 38% in the 55+ age group.
39% were unaware what their pension was invested in and 25% did not know pensions default to a fund if no choice is made.
54% of workers had considered choosing pension investments based on values or beliefs, but only 24% had actually done so.
41% said they would consider increasing contributions if their pension was invested in funds aligned to their values, rising to 53% for those aged 25-34.
Meanwhile, 26% said they felt unsupported by their workplace to understand pensions.
16% asked employers for guidance, and 10% said they sought no advice.
Watts-Lay noted pensions are often seen as dull and full of jargon, but said it is important for people to be educated about their options so they can make informed decisions for their retirement savings.
He highlighted that nearly two-fifths of those aged 55 and over do not realise they have a choice of investment funds. He pointed out that at this stage, people need to start thinking about how they will generate a retirement income, whether by taking cash, buying an annuity, going into drawdown or using a combination, and make sure their pension investments match these plans.
He also said the research showed many would increase their pension contributions if they knew the funds matched their values and beliefs.
He explained there has been a big increase in interest in environmental, social and governance (ESG) factors, as people want their pensions to reflect what matters to them.
He added that ESG means different things to different people, but simply knowing pensions can make a difference can encourage people to engage more with their long-term savings.
Watts-Lay added: “For people to achieve better outcomes at retirement, they need support to understand not only their pensions but their general finances including ways to save and invest money, budget and manage debt.
“Many leading employers recognise this and provide financial wellbeing support in the workplace.
“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, as well as access to investment advice.”
He said: “An increasing number of employers are turning to specialist workplace providers to bring all this support together.
“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.”
