Pension warning: Britons face significant shortfalls as they need £696k for ideal retirement PLUS the state pension - how to plug gaps

However, most workers are set to fall significantly short of this target, with actual retirement incomes likely to be around £36,600.

There is a growing crisis in retirement planning, with many Britons likely to face difficult adjustments to their lifestyle expectations in later years.

To illustrate the pension shortfall, Royal London calculated the outlook for a typical 22-year-old worker starting on £24,000 annually.

Making minimum eight per cent pension contributions and assuming a 2.5 per cent yearly pay rise, this worker would accumulate approximately £468,000 by retirement at age 67.

This calculation factors in an annual compounded investment growth of five per cent after fees, assuming contributions from day one of employment.

When combined with the state pension, this pot would provide an annual retirement income of around £36,600 - falling £12,200 short of the desired £48,868.

To achieve the desired retirement income of £48,868, workers would need to build a pension pot of approximately £696,000, in addition to the State Pension.

Clare Moffat, Pension and Tax Expert at Royal London said: "Many people have an idea of how much they would like in retirement but that doesn't always match the amount that they have managed to save.

"It's important to understand how much you need in retirement and the PLSA's Retirement Living Standards can help with this.

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"Discovering any potential shortfall sooner can give you time to take action to improve your lifestyle in retirement. The best preparation for your long-term future is to start saving into a pension as early as you can. This means that small amounts of money grow into larger sums over time."

The importance of workplace pensions is widely recognised, with almost half (48 per cent ) of workers ranking it second only to salary when assessing company benefits.

Modern careers are increasingly fluid, with younger workers aged 18-34 already holding an average of 2.9 pension pots, compared to the overall average of 2.4 pots.

Mofatt added: "The days of people being wed to one or two employers over their working life are long gone."

Under current auto-enrolment rules, employers must contribute a minimum of three per cent to workplace pensions, with total contributions reaching eight per cent.

Many employers offer to pay more than the minimum three per cent if employees increase their personal contributions, but this opportunity is being missed by some workers.

One in ten workers offered this matching incentive don't take advantage of it, Royal London's research shows. Of those declining the extra employer contributions, 44 per cent say they can't afford to increase their own payments. A further 24 per cent report they don't understand how the matching scheme works.

These missed opportunities could significantly impact final pension pots. Women face particularly severe challenges in retirement planning, with the gender pension gap creating lasting inequalities.

Men are twice as likely to have a personal pension compared to women (34 per cent versus 16 per cent), according to Royal London's research.

The impact of reduced working hours can be substantial. A worker dropping to 50 per cent hours at age 35 for childcare, before increasing hours at age 51, would see their retirement income fall to around £32,000.

Moffat concluded: "There are many reasons for the gender pension gap, including lower salaries among women, higher levels of unpaid caring responsibilities and the effect of the menopause."

This represents a £17,000 shortfall from the average desired retirement income.