The average UK household can expect to see its income fall by 53 per cent on retirement, new research from Fidelity International, a pension provider, has shown.

The resulting pension is less than many expect and lower than the minimum wage.

According to Fidelity's annual retirement index, a worker on the median salary of £457 a week - £23,764 a year - will receive just £215 a week in retirement, including savings and state benefits.

That is £6 below the minimum wage. The research also highlights the gulf between the prospects for workers in final salary, or defined benefit, schemes and those in increasingly common money purchase, or defined contribution, plans.

Fidelity said that final salary pensioners could expect to retire on two thirds of salary after 40 years of service.

A money purchase pensioner, whose pension is tied to contributions and investment performance, will replace 38 per cent of their final salary.

The gap is likely to grow because companies have exploited the shift to money purchase schemes to cut employer contributions. Simon Fraser of Fidelity said: “Many young people do not even open a pension, and those who do usually pay just 5 per cent of their salary.”

Times Recommends

• How to sell your home in a downturn
• How to boost your spending power
• Unemployment benefits explained