Two new studies from Scottish Widows and Fidelity International have highlighted the growing challenge of pension adequacy, as the government’s Pensions Commission considers how to improve outcomes for savers.
Scottish Widows’ report, ‘Retirement Realities: Unlocking The Workplace Benefits’, estimated that more than a third of UK workers – around 11.6 million people – are at risk of being unable to cover basic needs in retirement.
Its National Retirement Forecast suggests one in five full-time employees could face poverty in later life. Outcomes are worse for part-time workers who fall below the £10,000 auto-enrolment threshold, as a third (34%) are at risk of not being able to cover basic needs.
The provider found widespread disengagement, with 38% of employees saying they have little or no understanding of their workplace pension benefits – despite most employers offering information and support. It estimates that workplace schemes will make up around 63% of total retirement income, and that a single person outside London now needs £13,400 a year to meet minimum living standards.
Graeme Bold, managing director of workplace and intermediary wealth at Scottish Widows, said: “A workplace pension can be the most powerful tool people have to shape their financial future, but low engagement is holding people back from taking their best shot at long-term saving.
“A workplace pension can be the most powerful tool people have to shape their financial future, but low engagement is holding people back from taking their best shot at long-term saving.”
Graeme Bold, Scottish Widows
“There’s a broader opportunity for pension providers, employers and those managing employee wellbeing to help them make the most of this workplace benefit. The government must also look at supporting part-time workers and lower earners with the expansion of auto-enrolment.”
Global study finds lack of retirement readiness
Separately, a report from Fidelity International – ‘The Longevity Revolution: Preparing for a New Reality’ – produced with the National Innovation Centre for Ageing, found that two in five people aged 50 and over worldwide expect their savings to last at least 10 years less than their life expectancy. This figure was 35% in the UK. When measured against a potential 100-year lifespan, nearly three-quarters (74%) are unprepared.
Stuart Warner, global head of platform solutions at Fidelity International, said: “People are living longer than ever, but too many are preparing for retirements experienced by their parents and grandparents. This mismatch between life expectancy and savings horizons risks leaving many underprepared.”
Together, the findings underline a widening adequacy gap. As life expectancy rises and savings lag behind, industry figures say higher default contributions, better engagement, and support for part-time and lower earners will be vital. They also strengthen the case for the Pensions Commission’s review of long-term adequacy and auto-enrolment reforms.
Warner said: “We have an opportunity to create the conditions for people to live longer, more fulfilling retirements. Organisations and policymakers who embrace longevity wisely will not only support individuals in achieving security and purpose, but also establish a society that is wealthier, healthier and more cohesive than the one before it.”
