Workers are failing to provide for their pension

Around 21 per cent of people who are in a position to be paying into a pension are failing to do so, said life insurer Scottish Widows.

There has also been a sharp drop in the number of people who are saving adequately for retirement during the past 12 months, with the proportion dropping from 54 per cent to 48 per cent – its lowest level since 2006.

The amount that people are saving towards their retirement has also fallen during the past year, with people aged over 30 who earn more

than 10,000 a year and do not have access to a final salary pension scheme typically setting aside 9.2 per cent of their pay.

This is down from 9.3 per cent a year earlier and falls short of the 12 per cent that Scottish Widows estimates people should save in order to have a comfortable retirement.

Ian Naismith, head of pensions market development at Scottish Widows, said: "The last two years have been tough on the economy, and we are finally seeing the effects trickling through to pensions savings.

"The previous three years saw a steady rise in the number of people saving adequately for retirement, but now we are seeing the full impact of the downturn on people's retirement pots.

"There is still a great deal that needs to be done from both the Government and the industry to better encourage pensions savings for the long term, particularly in the current economic environment."

Only 43 per cent of women are currently saving adequately for their retirement, down from 47 per cent in 2009. The fall has been even bigger among men, dropping from 59 per cent to 52 per cent, although men are still more likely to be saving more than women.

Four out of 10 people said they were saving less towards their retirement because of the economic downturn, while 32 per cent think the economic problems have reduced the size of their pension fund.

Nearly half of people said they felt worse off than they did a year ago and 20 per cent said they had saved less than previously during the past 12 months.

Around 54 per cent of people who are not currently paying into a

pension said they could not afford to do so, with 38 per cent claiming they did not think they would ever have enough money to start one.