Around 12.2 million adults in the UK are at risk of being unable to afford life’s basics after they retire, a report has said.
The figure, from Scottish Widows’ national retirement forecast, is an improvement on last year, when 15.3 million were thought not to be on track for even the minimum needed in retirement.
Several factors have fuelled the decrease, including people without a pension seeing improvements elsewhere, such as through slightly higher pay, increased non-pension savings or levels of homeownership.
Falls in energy costs have also helped, but with global events such as the war in Iran pushing them back up, this positive progress could soon be undone, researchers warned.
What the forecast found
More than a third of those who are in part-time employment or are self-employed face a less than minimum retirement lifestyle, the report found, while “fewer than one in five full-time employees face pension poverty”.
Increasing pension contributions under automatic enrolment can reduce pension poverty, it added, but this doesn’t apply to the self-employed and those who work part-time jobs below the earnings threshold, as they aren’t automatically enrolled.
Half of those with “physical or mental health conditions that impact their day-to-day lives” also face pension poverty.
The national retirement forecast is based on retirement living standards set out by Pensions UK, which are aimed at helping pension savers picture what kind of lifestyle they could have in retirement.
YouGov surveyed 6,000 people aged 22 to 65 in February, asking them about their retirement outcomes based on their savings, behaviours and income sources, then compared their expected income to potential living and housing costs in retirement.
Reaction to report
Work and Pensions Committee chairwoman Debbie Abrahams welcomed the drop in overall projected levels of pension poverty, but said the report “tells a sombre story – millions could still face hardship”.
Pete Glancy, head of pension policy at Scottish Widows, called it a “complex picture”, warning that most people “are unlikely to have enough in their pension pots alone to fund their desired retirement”.
Helen McGinty, head of financial advice distribution at Skipton Building Society, urged people to plan for retirement early, saying: “Small steps taken today can make a huge difference to how comfortably – and confidently – you’re able to live in the future.”
The Department for Work and Pensions said the new Pension Schemes Act would help “millions of workers to the tune of up to £29,000 by the time they retire”.
Millions of pensioners will also see their yearly state pension rise by up to £2,100, thanks to the government’s commitment to the triple lock, the spokesperson said.
