A shocking 1.2 million more Brits than a year ago are not on track to afford even a minimum lifestyle standard in retirement, a new report reveals.
Nearly two-fifths (38 per cent) of working age people in the UK are estimated not to be falling short on their pension savings, according to the research from Scottish Widows. This is up from 35 per cent from last year.
Scottish Widows uses the retirement living standards produced by the Pensions and Lifetime Savings Association (PLSA) to make its calculation.
The minimum standards under its definition is £14,400 a year, which is enough to cover basic needs with some left over for fun. For example, this includes being able to afford a one-week UK holiday and having £50 to spend a week on groceries or £95 as a couple. The minimum standard assumes that someone would not have a car.
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More than half expect to work longer
The increase in those projected to fall short of the minimum standards has been driven by living-costs rises such as surging rents, the report said. Rents for example have increased by 15 per cent between 2022 and 2023, whilst the state pension increased by 8.5 per cent and wages by 6.2 per cent.
The research, which used a YouGov survey of more than 5,000 people across the UK in March and April, found that more than half (54 per cent) of UK retirees expect to work longer than they would like, on average by seven years. The typical age that people said they would like retire at is 62.
Almost a third (27 per cent) said they don’t feel they will ever be able to retire, while just 34 per cent think they are currently preparing adequately for retirement.
Scottish Widows’ 20th annual retirement report also found that younger generations would like to retire even earlier. People aged 18 to 29 want to retire at 61 typically, and would be prepared to work until 64 on average if necessary – although this would still leave a gap before they reach state pension age.
Across all age groups, more than a quarter (27 per cent) of those who have made retirement plans do not feel that they would ever be able to afford to do it.
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Change needed
Scottish Widows proposes reforms to automatic enrolment including lowering the contribution age, which is currently 22, and introducing an equivalent for self-employed workers. It also suggests a roadmap to increase minimum contributions into pensions from eight to 12 per cent, “with a strong steer that those who can afford 15 per cent should do so”.
Pete Glancy, head of pensions policy at Scottish Widows, said: “The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern.
“It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for. In the meantime, helping people to make the very most of what they have is going to be critical.”
He added: “At present only the wealthiest tend to rely on professional support from a qualified financial adviser. As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.”
