Millions of workers could face a significant drop in income when they retire, as new research suggests current pension savings are falling well short of what is needed for a comfortable retirement.
A report from Pensions UK has found that while most people are on track to achieve a basic standard of living in retirement, far fewer are saving enough to enjoy the lifestyle they expect.
According to the latest estimates, a moderate retirement now requires an annual income of £32,700 for a single person and £45,400 for a couple. However, only 23% of working-age people are currently on course to reach those levels.
The findings reflect the growing impact of higher living costs on retirement planning. Pensions UK estimates that even a minimum standard of living now requires annual income of £13,900 for a single person and £22,500 for a couple, although around 82% of workers are expected to achieve this level.
For those aiming for a more comfortable retirement, the challenge is even greater. The report estimates that an individual would need £45,400 a year, while couples would require £62,700. Yet just 9% of workers are currently on track to reach those income levels.
The retirement living standards, developed independently by the Centre for Research in Social Policy at Loughborough University, are based on expected spending on essentials and everyday lifestyle costs such as food, transport, leisure and holidays. Housing costs are excluded from the calculations.
Pensions UK said the amount needed for retirement has increased over the past year, largely due to higher spending on food and social activities, with costs broadly rising in line with inflation.
The organisation is urging workers to review their pension contributions and consider whether they are saving enough to meet their retirement goals. It is also calling on employers and the government to play a greater role in improving long-term retirement outcomes.
The report comes as the government renews its focus on pension adequacy through the revival of the Pensions Commission, which will examine whether current workplace pension contribution levels remain sufficient. The original Commission paved the way for automatic enrolment, a policy that has significantly increased pension participation over the past decade.
While automatic enrolment has helped millions begin saving for retirement, the latest figures suggest that, for many people, simply saving may no longer be enough. Without higher contributions or earlier planning, a growing number of workers could find their retirement income falls well below their expectations.
