Fifteen million Britons are not saving enough for retirement and more than four in 10 working adults are not putting aside anything at all, a Government report has warned.

Low and middle earners, the self‑employed and women are most at risk of hitting a 'severe cliff-edge' in their income when they retire, it says.

The report was published by the Pensions Commission, an official initiative set up last year by the Government to try to stop future retirees ending up poorer than older people today.

It addresses the extent of the problem in its publication today, and its recommendations will follow in a final report next year.

The Commission found around half of low and middle earners are only saving at minimum automatic enrolment levels, with little else to fall back on.

And it says where employers are contributing to their workers' pensions at around the statutory minimum rate, this is largely benefiting higher earners.

At present, people auto enrolled into work pensions save at minimum 8 per cent of a certain portion of their salary - their total earnings between £6,240 and £50,270 a year before tax.

Workers put in 4 per cent, employers 3 per cent, and the Government 1 per cent via tax relief.

Many employers are more generous and pay in above the 3 per cent minimum, especially if you voluntarily increase your own contributions.

But the Pension Commission report says that one third of eligible private sector workers are only enrolled at the minimum contribution levels - and this rises to half among the lower paid. The median earner is contributing 1.7 per cent of pay above the auto-enrolment minimum level. 

Many pension industry experts have called for the standard contribution to be raised to 12 per cent of salary.

However, it is up for debate how much extra individuals would be expected to put in, and whether employers would be compelled to increase their contribution too.

The Government has said it will not make any changes to automatic enrolment contribution levels in the current parliament, so any decision has to wait until after the next election, due in 2029 at the latest.

The Commission says it is going to consider how the auto enrolment eligibility criteria, income thresholds and minimum contribution rates will need to be adjusted in future - so we can expect it to weigh in on this issue in its final report next year.

In the meantime, it made the following findings.

- Fifteen million people are under-saving for retirement and this could rise to 19 million unless action is taken.

- Some 45 per cent of working-age adults, or around 18 million people, are not saving into a pension at all, despite nearly half of them being in work.

- Around 3 in 10 private pension pots are accessed at the earliest possible opportunity - currently age 55, rising to 57 in April 2028 - with half of all pots taken out in full.

- Nearly half of pots accessed at this point are spent on big-ticket items like a car, holiday or home renovations.

- Only 4 per cent wholly self-employed workers are saving for retirement, and younger self-employed people are even less likely to do so.

Two decades ago, the Turner Commission on pensions led to the launch of the auto enrolment initiative, which has succeeded in getting a lot more people saving into private pensions.

The current Pensions Commissioner, Baroness Jeannie Drake, called for a 'renewed national settlement on pensions'.

'The recommendations we present in our final report will address the need to secure adequate income in later life and a pension system that is fit for decades to come,' she says.

'The Commission will set out the course to improving future outcomes whilst ensuring the system is fair and sustainable within and between generations.'

The Pensions Minister, Torsten Bell MP, says: 'Britain has got back into the pension saving habit, but the job is only half done with tomorrow’s pensioners still on track to be poorer than today’s.

'The Commission warns that without action millions more people could be at risk of becoming reliant on state support in retirement.

'The Commission is clear that change must happen in the right way, with any recommendations for change implemented gradually. The Government has ruled out any changes to automatic enrolment contributions this Parliament.'

The full interim report called Pensions 2050: Evidence and Future Priorities is here.

Commission’s final report 'cannot pull any punches'

'The UK is edging ever closer to a pensions adequacy crisis,' says Andy Briggs, chief executive of Standard Life.

'It is hard to see how any independent review could conclude that auto enrolment contributions set at 8 per cent are sufficient.

'While change cannot happen overnight, we should be setting a clear path towards increasing contribution rates to 12 per cent gradually over time.

Mark Futcher, head of defined contribution pensions at Barnett Waddingham, says: 'It's reassuring that the Pension Commission is focused on the right issues - but it now needs to put its foot on the pedal.

'Too much time has already been spent diagnosing the same problems, while lower earners, part-time workers and the self-employed continue to be left behind by the pensions system.

'The Commission’s final recommendations in 2027 cannot pull any punches. We can’t keep staring at the same problems year after year - it’s time for decisions that genuinely move the dial on retirement outcomes.'

'Concerning' findings on the rush to access pensions

Pete Glancy, head of pension policy at Scottish Widows, says: 'Auto-enrolment worked because it was bold, instead of tinkering around the edges.

'There's an urgent and pressing need to extend an auto-enrolment equivalent to the 96 per cent of self-employed workers not currently saving into a pension.

'Pensions as we know them won't work for the self-employed – we need flexible products that sit alongside other savings and investments with a default "opt-out" mechanism.'

David Brooks, head of policy at Broadstone, says: 'The interim report bucks the trend of received wisdom around the success of auto-enrolment and the benefits of pension freedoms.

'Millions of people are still sitting outside of the confines of auto enrolment, even those who are in a job, while many of those who are saving are not contributing adequately.

'There are concerning findings around how quickly people are rushing to access their pension and the proportion who are fully encashing their pot, leaving them vulnerable to running out of money later on in retirement.

Speculation about tax-free cash must be stamped out  

Rachel Vahey, head of public policy at AJ Bell, says: 'The shift from generous defined benefit pensions to defined contribution schemes has transferred more responsibility and risk onto individuals, at the same time as people are living longer and struggling with the cost of everyday life.

'But we also need to avoid simplistic conclusions. The Commission reports concerns that people are taking high levels of full cash withdrawals. However, the fact that people access pensions early does not automatically mean they are making bad decisions.

'Some are bridging the gap to state pension age, moving gradually into part-time work or cashing in very small pension pots while leaving larger retirement savings untouched.'

Vahey adds: 'In the run up to the last two Budgets, repeated speculation around pension tax breaks led to many more people making the rushed, and sometimes irreversible, decision to access their tax-free cash.

'The Chancellor had the opportunity to stamp out this speculation but chose not to act. If we want people to lock money away for decades, they need confidence the goalposts will stay put.'

Dr Andrea Barry, deputy director for work at the Centre for Ageing Better, says: 'The Commission’s diagnosis closely mirrors what we’re seeing in our own research.

'Early, abrupt and often unplanned, ends to people’s working lives in their 50s and early 60s is a major risk to pension adequacy. Often this is driven by health, caring responsibilities, and individual circumstances.

'The Government needs to ensure that fewer people leave the labour market with years to go before state pension age and without the necessary financial resources for an adequate retirement.'