Seven in 10 private sector workers have no pension

Government retirement scheme reveals 68pc of workers in the private sector do not pay into a pension.

Pensions are not a priority for private sector workers, a report produced by the Government has revealed.

Seven in 10 private sector workers do not currently pay into a retirement scheme, according to Nest, the state-provided default pension system.

The number of "active" pension savers in the UK fell from 12.2 million at the peak in 1967 to 8.2 million in 2011, according to the Office for National Statistics.

With the introduction of auto-enrolment, there will be an increase in the value of annual pension contributions of £11bn by 2018. Up to 10 million people are expected eventually to be enrolled into workplace pensions under the scheme.

The Nest report revealed that it was predominantly lower paid employees who were not making preparations for retirement, with the average salary of an "unpensioned worker" equating to £20,000 some £10,000 less than for those who have retirement savings.

It has been predicted that some lower paid workers will fail to benefit from auto-enrolment as the annual wage threshold to qualify for the scheme is currently £8,105.

The Nest report found that this would result in an unfair bias against women and part-time workers, who are statistically less well paid.

"Automatic enrolment sweeps away one of the biggest barriers to saving by harnessing inertia. However, there still remain a number of obstacles, ranging from the financial and the administrative to the emotional," admitted Nest chief executive Tim Jones.

"In order to overcome these, all of us in the provider community need to continually develop our understanding of employers’ and workers’ perspectives and ensure we’re thinking carefully about delivering change to maximum effect."

Nest disclosed that a third of unpensioned workers were aged 30 or less, raising concerns about whether younger workers are engaged with the concept of saving for retirement.

Tom McPhail, head of pensions research for Hargreaves Lansdown (LSE: HL.L - news) , said just 63pc of consumers had bought into the idea of auto-enrolment.

"This figure shows that there is still a considerable amount of work to be done in convincing individuals of the benefit of saving for retirement," he said. "Similarly, 67pc said they could stop worrying about their retirement once they had been auto-enrolled; the problem here is that, for most people, the default auto-enrolment contributions will almost certainly not deliver a pension which will meet their expectations."

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