Millions of savers will get a higher income from the state pension when they retire than from their company scheme because the contributions they make are woefully inadequate, according to new research.

Despite there being a slight increase in the amount of money paid into company schemes, contribution levels still remain well short of what is needed to provide a comfortable retirement, said consultancy group Mercer, which compiled the report.

Tony Pugh at Mercer said: “At the current rate, most employees will get more through state benefits than their occupational plan, which will come as a surprise to many.”

The average saver puts in 10.4% of their pay, with the company contributing about 6.8% and individuals 3.6%. To ensure an adequate retirement income, Pugh said individuals and their employers should be contributing 15%.

Even high earners face disappointment. Although the income from their company scheme is likely to surpass that from the state pension, their expectations are unlikely to be met, said Mercer. Most expect to get a pension of at least 50% of their pay when they retire. At current rates, the average employee with 30 years’ service is more likely to get 20%-30%.

Planning for retirement has become harder in recent years as an increasing number of firms have closed final-salary schemes and shifted to money purchase plans, under which the companies only guarantee how much they will pay in and not what the pension will be worth at retirement.

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