More than 15 million people across the UK are at risk of retirement poverty, according to a new report from Scottish Widows.
More than a third (39%) of people polled by the pension provider were not on track for a minimum lifestyle in retirement, the research found.
This has worsened from 35% in 2023, which means 1.6 million more people are at risk of retirement poverty, Scottish Widows’ latest Retirement Report detailed.
While pension saving levels have increased over the past 12 months, they have failed to keep pace with the cost of living, the provider found.
Pete Glancy, head of pensions policy at Scottish Widows, called on the government to ensure that the second phase of its Pensions Review is broad enough to take a holistic view of people’s financial journey through life.
He added: “There are three key areas that must be addressed urgently: auto-enrolment, self-employed contribution rates, and housing, considering both home ownership and affordable housing.
“For now, the challenge is helping people make the most of what they have. It is essential to ensure people feel financially empowered to make informed decisions and take proactive steps for their future – with a strong sense of financial independence playing a key role.”
Need for action ‘has never been clearer’
Brian Byrnes, head of personal finance at Moneybox, said the findings painted a stark picture of the UK’s worsening retirement outlook.
He added: “With 1.6 million more people now at risk of retirement poverty compared to last year, the urgency for action has never been clearer – especially for groups like Generation Z, low to middle earners, and the self-employed.
“Although pension saving levels have technically risen, they simply haven’t kept pace with the cost of living. We urgently need to equip people with the tools, support and confidence to take control of their financial future.
“That starts with access to clear, personalised information – something the government’s pensions dashboard can help provide.”
“We cannot afford another year of delays or policy inertia – or a Dickensian future is on the cards where people are forced to work well into old age just to make ends meet.”
Paul Leandro, Barnett Waddingham
Paul Leandro, partner at Barnett Waddingham, warned: “Year in, year out, the inadequacy of pension contributions is a concern we see – and without clear, decisive action for change, the ticking timebomb of the UK’s pension system could soon blow up in our faces.
“The new pensions minister’s commitment to addressing retirement adequacy is a welcome message, but the devil will now be in the detail. We cannot afford another year of delays or policy inertia – or a Dickensian future is on the cards where people are forced to work well into old age just to make ends meet.”
The Pension and Lifetime Savings Association (PLSA) estimates that a minimum retirement lifestyle would cost a single person outside London £14,800 a year in today’s money, excluding housing costs – leaving retirees with minimal funds after basic living costs.
Scottish Widows found that, for most young adults, competing financial goals can make saving for a pension a challenge.
A quarter (25%) of people in their 20s prioritise saving for emergency expenses, according to the research, while 13% aren’t able to save at all.
Minimum contribution levels leaving savers vulnerable
The analysis found that, although auto-enrolment has resulted in millions of people saving for the future, the default contribution rate of 8% of salary leaves pension scheme members vulnerable if they are saving only at this level.
Those earning between £20,000 and £35,000 and in their 30s were most likely to contribute the minimum 8%, Scottish Widows found.
This group faced a 60% income drop in retirement on average, with 70% seeing their income halved compared to their working life income. The report found that 60% of people in their 30s know they aren’t saving enough, and 30% don’t save at all.
Self-employed workers also faced poor retirement outcomes due to not being eligible for auto-enrolment.
More than half (51%) are at risk of not being able to cover their basic needs in retirement, Scottish Widows reported, while just a quarter (25%) were on track to achieve a minimum retirement lifestyle according to the PLSA’s Retirement Living Standards model.
Two in five (39%) of self-employed workers believe they aren’t saving enough for retirement, while almost a quarter (23%) were not saving anything.
