New research from Bowmore Financial Planning, part of Bowmore Wealth Group, has indicated that UK savers are falling short of recommended pension contributions.

Bowmore’s analysis of HMRC data for 2022–23 suggests savers would need to contribute 12% of their annual salary to meet guidance from Pensions UK.

However, the company estimates that reaching this level would require around £23bn in additional pension contributions each year.

Bowmore Wealth Group’s review of HMRC data on incomes and pension contributions shows that private sector workers are putting an average of 3.63% of their salary each year into a private pension.

This means that, out of the £38.7bn that should be saved each year under Pensions UK guidance, only £16bn is actually being put into pensions.

The company points to weaknesses in the auto-enrolment framework as one factor behind low contribution levels.

It notes that self-employed workers are not automatically enrolled into pensions and often divert money into building their businesses instead of retirement saving.

Bowmore also highlights that many businesses calculate auto-enrolment contributions only on earnings between £6,240 and £50,270.

This means many higher earners are not contributing enough to their pensions. Workers under the age of 22 are also excluded from auto-enrolment altogether.

Pensions UK, the trade body for pension schemes, has said that raising average pension contribution rates to 12% would deliver an average retirement income of £31,300 per year for UK taxpayers.

Bowmore Financial Planning managing director Gill Millen said: “The huge gulf between what Pensions UK is recommending people save and what they are saving is alarming.

“Our data shows that even in their 40s and 50s, when many have paid off much of their mortgage, people are still contributing only 3.3–4.3% of their salary into their pension. With retirement costs spiralling, it is more important than ever to have a healthy pension pot. Setting aside money now will be tough for many savers.”