Middle Class Britons are facing retirement in poverty, with millions expected to see their income fall by more than half.

An alarming study has found that their low savings will leave them exposed to an "acute squeeze" on their standard of living - with many families now retiring seeing take-home income drop by 57 per cent to an average of just ยฃ13,713.

The stark report also predicts that five million lower-middle class households will have to survive on little more than the state pension, even though they may have been saving for decades.

Roughly a third of those will be left with even less, having to survive each year on just ยฃ11,000.

It could force millions to stay on at work till their late 60s or even 70s following a change in the law this autumn which is expected to end compulsory retirement at 65.

Competition for jobs will also be fierce, at a time when youth unemployment is soaring.

And the news gets even worse. The report, by think-tank Chatham House, predicts that by 2030 people who are retiring will see their take-home income crash by an average of 61.7 per cent as the inadequate levels of saving come home to roost.

It adds up to a litany of grim news for Britain's 21 million over-50s, faced with falling incomes, rising prices, the spectre of redundancy and a stagnant property market.

Dr Paola Subacchi, Chatham House's international economics research director, said: "The UK has a distinct problem with middle-income earners who are failing to save enough and are likely to find the drop in income during retirement unexpected and unacceptable."

Darren Philp at the National Association of Pension Funds said: "It's a common misconception that only low earners will be poor in their old age.

"Middle-income households could also be hit. People are living longer but are not saving enough for their retirement.

"They need to start planning their retirement as soon as possible. The earlier they start saving, the better their chance of a comfortable retirement.

"Too many are relying on the state pension, which is one of the worst in Europe. We need to ensure that individuals have a firm foundation on which they can save for their old age.

"The Government has made a welcome commitment to reinvigorate occupational pensions, we now need to see some progress against this commitment."

There is a glimmer some hope, according to the report. If Britain's 15 million middle-income households were to save an additional 10 per cent of their income from the age of 45 to 64, they could raise their retirement funds by a quarter by 2050.

The report, which comes as the Government plans to raise the retirement age, also suggests that matching workers' pension contributions would be a better way to encourage savings than giving tax relief on contributions.