A major report, published by Scottish Widows, reveals a dramatic deterioration over the last 12 months in the number of people saving adequately for retirement.

This provides one of the starkest warnings yet that, as a nation, we are simply not saving enough for our old age, said the insurance company.

Two key measures used to monitor pensions savings behaviour have fallen significantly since 2005.

The Scottish Widows Pension Index, which tracks the percentage of the population saving adequately for retirement, falls from 55% in 2005 to 46% in 2006. And the Scottish Widows Average Saving Ratio, which tracks the percentage of income being saved for retirement by UK workers not expecting to get their main retirement income from a defined-benefit scheme, drops from 7.9% to 5.8%. This falls significantly short of Scottish Widows’ recommended target savings ratio of 12% of earnings.

Ian Naismith, head of pensions market development at Scottish Widows, says: "The deterioration in the Index and the Ratio is very disappointing when you consider how high profile pensions have been in the last 12 months."

"In fact, our figures show that 4 in every 5 people who aren’t relying on a final-salary pension are failing to save adequately for their retirement, and that 2 in 5 are saving nothing at all. With this level of under-saving, no-one can be in any doubt about the challenge facing us all when it comes to preparing for retirement."

There also is little support for working beyond the state retirement age, with only one-in-three people (34%) saying they would be happy for it to go above 65 (as proposed in the pensions White Paper) to avoid large tax increases.

However, a third (33%) of those not saving at all say they would be willing to work beyond 70, suggesting they have a more realistic view about the consequences of not saving.

Naismith concluded: "Although it is too early to tell it does appear, regrettably, that the noise surrounding pensions could have led many to put their retirement savings on hold while they wait and see what happens with the much-publicised government reforms. There also appears to be a significant decrease in confidence that final-salary schemes will provide a good income in retirement."