Nearly two in five people (39 per cent) are at risk of being unable to cover even their basic needs in retirement as pension savings fail to keep pace with the rising cost of living, according to a concerning new report.
The research, conducted by Scottish Widows, suggests the situation has worsened compared with 2023, when just over a third (35 per cent) of people were thought to be on course to fall short of having a minimum lifestyle in retirement.
Low- to middle-income earners and people under the age of 40 could be at particular risk of falling short of having a lifestyle in retirement that covers even their basic needs, the report warned.
People who identify as LGBTQ+, people with disabilities and people from black communities are particularly likely not to be on track for a minimum lifestyle in retirement, and part-time and self-employed workers are more likely to face worse retirement outcomes than full-time workers, the research indicates.
The report also highlighted housing costs as a significant barrier to meeting basic retirement outcomes. Some people may face paying mortgages or rent into their retirement, with high housing costs also making it tougher to save during their working lives.
Differences in retirement prospects across the UK were also found.
The proportion of people estimated to be on track to have at least a minimum lifestyle in retirement ranged from just over half (52 per cent) in both Northern Ireland and the North East of England to more than two-thirds (68 per cent) in the East of England.
Scottish Widows teamed up with Frontier Economics and used a YouGov survey of more than 5,100 people across the UK in January and February.
Researchers also used the retirement living standards set out by the Pensions and Lifetime Savings Association (PLSA). The standards were developed to help pension savers picture what kind of lifestyle they could have in retirement and set out three retirement standards – basic, moderate and comfortable.
The Scottish Widows report indicated that just over a fifth (22 per cent) of people across the UK may end up with a minimum lifestyle in retirement, which would mean having enough money to cover basic needs, with some money left over for non-essentials.
One in 12 (8 per cent) is on track for a moderate lifestyle, which is the next step up and would mean having more financial security and wriggle-room in their budget.
Three in 10 (30 per cent) are estimated to be on track for a comfortable retirement lifestyle, which is the most affluent of the three retirement lifestyles, with more financial freedom and room for luxuries.
Pete Glancy, head of pensions policy at Scottish Widows, said: “Our research couldn’t be more timely, spelling out just how crucial targeted measures are in preventing millions from living in retirement poverty in the coming years.”
“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.”
On track for minimum PLSA retirement living standards
Here are the proportions of people who are estimated to be on track for at least the minimum PLSA retirement living standards in the UK nations and regions, according to Scottish Widows:
- Northern Ireland, 52 per cent
- North East, 52 per cent
- South West, 54 per cent
- Wales, 56 per cent
- West Midlands, 58 per cent
- London, 59 per cent
- North West, 59 per cent
- Scotland, 61 per cent
- East Midlands, 64 per cent
- Yorkshire and the Humber, 66 per cent
- South East, 66 per cent
- East of England, 68 per cent
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