Employers have been warned to educate staff about pension contributions or face the prospect of employees being unable to retire when they expect to.

Employee benefit consultants Hewitt & Becketts say 97 per cent of employees in defined contribution schemes do not understand how much they need to set aside to provide for retirement according to surveys it has carried out.

A majority does not even understand that in defined contribution schemes, they shoulder the risk for the performance of the investments into which their pension contributions are put, according to Ms Deborah Reidy, executive director of Hewitt & Becketts.

A study by the consultants shows that a 30-year-old majoining a defined contribution scheme and contributing 4 per cent of gross salary each month alongside a 6 per cent contribution from the employer - a fairly standard arrangement - can expect to wait until they are 67.5 years old before being able to retire on just half his salary, assuming he invests in an equity fund.

However, depending on stock market returns, there is a one in 10 chance that he will be over 79 years old before he is able to leave work with a pension of just half his salary. At the other extreme, there is a one in 10 chance he could leave at 56.

Traditionally, pension planning has been based on retiring with two-thirds of salary.

Putting money into lower-risk investments, such as bonds, is not the easy alternative, according to the Hewitt's study. In the same scenario, such an investment choice would leave the employee unable to retire on half salary until somewhere between 70 and 82.

Ms Reidy urges employers to provide investment education for employees and to provide projection tools that would allow staff see how their level of contribution and investment choice might impinge on retirement options. "Employers will be faced with the consequences when employees cannot afford to retire at normal retirement age," she warns.