An additional 1.2 million people in the UK are now at risk of not achieving even a minimum retirement lifestyle as the pension savings gap continues to widen.
A new study, included in Scottish Widows’ latest annual retirement report, suggests that the percentage of savers not on track for the minimum retirement standard – as defined by the Pensions and Lifetime Savings Association (PLSA) – has increased to 38%, up from 35% just last year.
The report also highlights that 54% of UK retirees expect to work longer than they would like – on average by seven years – while 27% of those who have already made retirement plans feel they may now never be able to afford retirement.
Meanwhile, younger individuals (aged 18-29) express a desire to retire by 61 but are only willing to work until 64 if necessary. The increase in those facing the poorest retirement outcomes is attributed to the rising cost of living outpacing wage growth, which averages just 6.2%, the Scottish Widows research revealed.
Additionally, only 42% of people feel they have enough financial leeway beyond daily expenses to save for retirement.
Scottish Widows Head of Pensions Policy, Pete Glancy, noted the growing gap in retirement outcomes – and people’s quality of life post-retirement – between those already retired and those hoping to retire in future was a ‘great concern’.
He added: “However, people are starting to think about how their private pension pot might interact with their state pension entitlement to plan their retirement.
“But, there is still a real reliance on the state pension, and while some will be able to use their private pension pot to give them the flexibility they are looking for in terms of retirement age, it’s only starting to dawn on others that they may end up working for much longer.”
The report also highlighted that a majority (54%) of respondents were expecting the state pension to form a ‘meaningful portion’ of their income in retirement – with three-quarters of those who did considering it ‘hugely important’ to getting by day to day once they’d finished working.
Despite this, 12% admitted they weren’t convinced the state pension would be available to them, at least in its current form, by the time they come to need it.
Barnett Waddingham Partner Paul Leandro remarked: “Time and time again, research has pointed to the inadequacy of pension contributions across all age groups, and until there is a significant increase the situation will only worsen.
“This is particularly concerning as defined contribution, or workplace pensions have become the main source of retirement savings for a significant proportion of the population, and means real change will be needed if people are to have the retirement they desire.”
Source: Khan, Alina. FT Adviser. July 2024. https://www.ftadviser.com/pensions/2024/07/23/extra-1-2mn-people-not-on-track-for-minimum-retirement-as-savings-gap-widens/.
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