Millions of workers are heading towards a sharp drop in living standards when they retire, with more than three quarters not on track to save enough for what is considered a moderate retirement income, a new report has warned.
Research from Pensions UK, the trade body for the pensions industry, found that only 23 percent of the working population is currently on course to achieve a moderate standard of living in retirement.
The organisation said rising living costs were making it harder for people to build adequate pension savings and warned that many could face a significant fall in income when they stop working. It comes as employers continue to grapple with financial wellbeing concerns among staff, including worries over pensions, long-term savings and retirement planning.
A moderate retirement lifestyle is now estimated to require an annual income of £32,700 for a single person and £45,400 for a couple, Pensions UK said. By contrast, a comfortable retirement is estimated to cost £45,400 for one person and £62,700 for a couple.
Retirement expectations and reality diverge
The report, released on Wednesday, suggests that while most workers are likely to achieve a minimum standard of living in retirement, far fewer will reach the level many expect.
According to Pensions UK, 82 percent of workers are on course to achieve a minimum retirement income, defined as covering essentials such as food, household costs, a week’s UK holiday each year and occasional leisure activities.
But only 23 percent are expected to achieve a moderate retirement income and just 9 percent are currently on track for a comfortable retirement.
The retirement living standards are calculated independently by the Centre for Research in Social Policy at Loughborough University and are widely used to help workers understand how much income they may need after leaving employment.
The report said the amount needed for retirement had increased over the past year, largely because of higher costs for food, hospitality and social activities.
Calls for action on long-term savings
Zoe Alexander, director of policy and advocacy at Pensions UK, warned that many workers were not preparing sufficiently for retirement.
“Far fewer will go beyond that. That is out of step with what people expect for their future. Without action, too many risk facing a cliff-edge drop in income when they stop work.”
The organisation said employers, workers and government all had a role to play in encouraging higher levels of retirement saving.
Ministers are reviewing the long-term future of workplace pensions through the revival of the Turner Pension Commission, which originally led to the introduction of automatic enrolment into pension schemes.
The government has previously warned that workers retiring in 25 years’ time could be around £800 a year worse off than today’s pensioners if current saving patterns continue.
Women remain at greater risk
Separate figures from HM Revenue & Customs show women typically have around half the amount saved into pensions as men. Research by investment platform AJ Bell has also suggested women begin falling behind men in retirement savings from the age of 28.
Employment executives have increasingly argued that pension education and financial wellbeing support should form part of wider employee benefits strategies, particularly as workers face longer retirements and ongoing pressure on household finances.
Experts say it serve as a reminder that financial wellbeing extends beyond day-to-day cost-of-living concerns and increasingly includes helping staff understand and prepare for life
William Furney is a Managing Editor at Black and White Trading Ltd based in Kingston upon Hull, UK. He is a prolific author and contributor at Workplace Wellbeing Professional, with over 127 published posts covering HR, employee engagement, and workplace wellbeing topics. His writing focuses on contemporary employment issues including pension schemes, employee health, financial struggles affecting workers, and broader workplace trends.
- William Furney
- William Furney
- William Furney
- William Furney
