Nearly 9 million people are “significantly underpensioned” with private pension incomes between £3,650 and £6,750 per year, according to a new report. This equates to between 43 percent and 80 percent of the national average private pension income of £8,500.
The report by now:pensions, part of the long-term savings specialist Cardano Group, identifies carers, ethnic minority groups, people with disabilities, women, divorced women, single mothers, self-employed workers and multiple jobholders as those most affected. These groups face systemic barriers to saving, making them more reliant on the State Pension in later life.
Since the introduction of auto enrolment in 2012, more than 11 million people have been brought into workplace pension schemes. However, many underpensioned individuals fall outside eligibility thresholds, including income and job-type requirements – meaning they do not benefit from the scheme.
The report calls for policy changes to address the structural issues that prevent consistent and sufficient pension saving throughout working lives.
Carers, ethnic minorities and disabled people face shortfalls
Carers and individuals from ethnic minority backgrounds have seen a rise in employment and related pension contributions since the 2022 report, but their pension income remains below the population average. Their pension savings represent between 62 percent and 80 percent of the UK average.
People with disabilities remain the most affected group, with the lowest private pension income at just 43 percent of the national average. This means disabled individuals are retiring with £3,650 annually from private pensions, compared to the £8,500 average.
Despite improvements in employment and auto enrolment, these groups continue to face barriers that limit consistent pension contributions, such as intermittent work patterns, lower average earnings and exclusion from eligibility thresholds.
Gender pension gap persists despite enrolment progress
The report finds that women’s eligibility for auto enrolment has risen from 77 percent in 2020 to 85 percent in 2025. However, women are still retiring with private pension savings that are only 67 percent of the UK average.
Single mothers are particularly affected, with pension incomes amounting to just 54 percent of the average. Divorced women also fall into this underpensioned category. The report recommends including pension savings in divorce settlements to help address this gap.
Joanne Segars, Chair of Trustees at now:pensions, said, “Without further policy action, millions will continue to struggle to achieve a secure retirement. That’s why we’re suggesting key reforms, including removing the £10,000 auto enrolment earnings trigger, scrapping the lower earnings limit on pension contributions and introducing a family carer’s top-up.”
Calls for policy reform to close pension gap
The self-employed are also underpensioned, with pension income at 54 percent of the UK average. The structure of current pension policy means they often miss out on workplace schemes and are less likely to make private contributions.
John Adams, Senior Policy Analyst at the PPI and author of the report, said, “Changes to automatic enrolment criteria could make huge strides in pension saving, such as allowing the income from multiple jobs combined to count toward the earnings trigger or removing the earnings trigger entirely.”
The report proposes five policy actions: removing the £10,000 earnings trigger, scrapping the lower earnings limit on pension contributions, introducing a family carer’s top-up, considering pension assets in divorce settlements and increasing action on childcare costs and availability.
