Around 15 million people across the UK are not saving enough for retirement, according to a major new report warning future pensioners could face a sharp drop in living standards later in life.
Around 15 million people across the UK are not saving enough for retirement, according to a major new report warning future pensioners could face a sharp drop in living standards later in life.(Image: Getty Images )
About 15 million people are thought to be under-saving for their retirement, according to the Pensions Commission, which said a fresh “national settlement” for pensions was needed. The commission published an interim report on the state of retirement saving in the UK, warning that significant groups of people could face a severe cliff-edge when they retire.
Women, low and middle earners, and the self‑employed are among those who could be particularly at risk, according to the commission, which said the number of people under-saving for later life could reach 19 million without action.
Millions more people could also be at risk of becoming reliant on state support in retirement, the commission says.
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Its interim report said: “The forces reshaping our society – longer retirements, slower growth, and falling home ownership – demand a renewed national settlement on pensions.”
The report continued: “The share of our population over the age of 65 is projected to reach 28 per cent by 2075, up from 19 per cent today.
“The number of people aged 75 or over is projected to double between 2025 and 2075: a rise of six million.
“State Pension age increases and slowing life expectancy increases have kept down the old-age dependency ratio during the past 20 years, but over the next decade it is expected to reach three pensioners for every 10 working-age adults and four for every 10 by the 2070s.”
It added: “Spending on pensioner benefits (including the state pension) is projected to grow from around 6 per cent of GDP in 2024-25 to around 9 per cent by the early 2070s.”
Set up by the UK Government in July 2025, the commission aims to address savings challenges that have been building for decades.
Many people do not have salary-based pensions to rely on in retirement, as these have become less common, and instead bear the risk of how much money they will end up with, based on factors such as contributions and the performance of funds.
Some groups of people are also left out of automatic enrolment into workplace pensions, such as those earning below the £10,000 earnings “trigger” in a job and people who are self-employed.
The Commission said just 4 per cent (one in 25) of wholly self-employed workers are saving for retirement.
The report said: “Given there is no automatic enrolment for the approximately four million self-employed workers in the UK, the inertia-based pension-saving system does not provide for many who need it most.”
It added: “Although the share of women with private pension wealth has grown significantly, median uncrystallised private pension wealth in people’s late 50s was £156,000 for men in 2020 to 2022 and £81,000 for women (48% less).
“Pension participation gaps are also a particular worry for carers, people with disabilities and some ethnic minorities.”
The report said that working longer – and in particular reducing labour market inactivity among people in their 50s – is a necessary part of achieving adequate incomes in retirement.
It added: “But longer working lives can only be part of the answer and are easier for some people than others.”
There are also concerns about people running down their pension pots too early.
The commission said that on current trends about three in 10 private pension pots are accessed at the earliest possible opportunity.
A final report with recommendations will follow in early 2027 and the Commission said it wants to hear views from interested parties.
Pensions commissioner Baroness Jeannie Drake said that achieving a renewed national settlement on pensions “will require clarity of purpose, but it also offers a moment of opportunity; to renew a social contract that commands confidence across the country”.
She said: “The recommendations we present in our final report will address the need to secure adequate income in later life and a pension system that is fit for decades to come.”
Automatic enrolment into pensions brought millions of workers into pension saving, with nine in 10 eligible employees saving into a workplace pension.
But there are concerns that many people are still not saving enough for an adequate retirement.
The report said: “There is good reason to be concerned about the level of the legal floor for automatic enrolment contributions, which has become more of a norm than a minimum.”
Minister for Pensions Torsten Bell said: “Britain has got back into the pension saving habit, but the job is only half done, with tomorrow’s pensioners still on track to be poorer than today’s.
“The Pensions Commission sets out clearly the scale of the challenge: not enough people are saving for retirement, and many of those that are aren’t saving enough.”
Sir Steve Webb, a former Liberal Democrat pensions minister who is now partner at pension consultants LCP (Lane Clark & Peacock) said: “We have seen a ‘wasted decade’ when it comes to pensions policy in the UK.
“Since automatic enrolment was rolled out to employers of all sizes and at a minimum contribution rate at 8 per cent, there has been no progress on building up pension pots more rapidly.”
He said the Pensions Commission must “grasp the nettle of higher contributions” in its final report, adding: “Unless we rapidly increase the amount going in to workplace pensions we are at risk of seeing whole generations facing deeply disappointing retirements or having to work on long beyond the point when they would want to stop.”
