Millions of UK workers could be heading towards a retirement that falls short of their expectations, according to new research from Pensions UK.
The report found that around three quarters of workers are not currently saving enough to achieve what is considered a “moderate” standard of living in retirement. While most people are expected to reach a basic level of income, far fewer are on track to enjoy the lifestyle many envisage for their later years.
Pensions UK estimates that a moderate retirement lifestyle requires an annual income of around £32,700 for a single person and £45,400 for a couple. However, only 23% of the working population are currently on course to reach those levels.
The gap becomes even more pronounced when looking at higher retirement aspirations. A comfortable retirement is estimated to cost £45,400 a year for an individual and £62,700 for a couple, yet only 9% of workers are expected to achieve that standard.
By comparison, a minimum retirement lifestyle is estimated to cost around £13,900 a year for a single person and £22,500 for a couple. The report suggests that around 82% of people are likely to meet this threshold, highlighting the difference between basic financial security and the level of comfort many hope to enjoy.
The findings have reignited debate around pension contributions and whether current automatic enrolment levels are sufficient. While workplace pensions have helped increase participation in retirement saving, concerns remain that contribution rates have not kept pace with the income people expect to need in retirement.
Zoe Alexander, Executive Director of Policy and Advocacy at Pensions UK, warned that many workers are at risk of experiencing a significant drop in income when they stop working if savings levels do not improve.
The organisation has welcomed ongoing work by the government's Pensions Commission to consider whether minimum contribution rates should increase. In the meantime, it is encouraging employees to explore whether their employer offers enhanced pension matching contributions, which can help boost retirement savings beyond the statutory minimum.
The report highlights a growing challenge for both policymakers and savers. While automatic enrolment has successfully encouraged millions to start saving, many may still need to contribute more if they hope to achieve the retirement lifestyle they expect.
