Research from the firm found that a 22 year old starting work today would need to save 15% of their annual salary towards their pension to reach the desired retirement income, or face a shortfall of £4,000 per year.
However, with almost 60% of people delaying saving because of confusion surrounding pensions, PwC has called on the government to simplify the pension savings process and incentivise greater savings.
Raj Moody, PwC UK’s lead for pensions consulting, said, “It is clear that many people’s expectations of their pension pot and the reality at retirement will be very different as people simply aren’t contributing enough to their pensions.
“Any system that is asking people to lock up their money for many years needs to be simple to understand, trusted and sustainable to encourage greater savings levels. It also needs to include a strong up-front incentive.
“Our survey suggests that the pensions system in its current form isn’t incentivising people to save.”
PwC’s findings come just days after Big Four rivals KPMG also called for greater efforts to close the long-term savings gap.
KPMG said the UK had rarely been in a position where it had saved less than it does now, and criticised the government’s one size fits all approach to pension policy.
For its research, PwC interviewed 1,200 UK adults about their retirement plans. Almost six in 10 said their lack of understanding prevented them from saving more for their pension. This rose to 63% for women, and 64% for younger workers.
Philip Smith, head of defined contribution pensions at PwC, laid out a list of simplifying measures that could persuade people to put more into their pensions. These include introducing a single rate of tax relief on pension contributions, or making their pension tax free in retirement.
He explained, “Reforming pensions tax alone isn’t going to dramatically impact people’s motivation to save more towards their retirement.
“Efforts need to focus on improving saver awareness, increasing auto-enrolment contribution levels and improving financial education so people can plan for the retirement they hope for.
“The Financial Advice Market Review is an opportunity to make quality and affordable advice available for all and we believe technology should be at the core of the solution.”