New research has uncovered a stark reality for many Britons facing retirement, finding that nearly nine million in the UK are “significantly underpensioned”. Alarmingly, some are expected to survive on as little as £3,650 annually from their private pensions, according to a report by Now Pensions.
This amount falls considerably short of the average pensioner income of £8,500, which is in itself well below the threshold deemed necessary for a modest standard of living. When incorporating the state pension and other benefits, the typical individual can anticipate an annual sum of about £17,750 in retirement.
The Pensions and Lifetime Savings Associations suggests that to meet basic needs along with a few extra comforts, such as the occasional takeaway, individuals should budget a minimum of £14,400 a year. To enjoy a truly comfortable retirement, the target rises significantly to £43,100 per annum.
The findings highlighted particular groups at greater risk of insufficient savings and potentially facing poverty: disabled people, women, divorced women, single mothers, self-employed individuals, workers juggling multiple jobs, carers, and those from ethnic minority backgrounds.
A gender gap in retirement savings also persists/ Women are typically retiring with around £69,000 saved, compared to men’s £205,000.
Astoundingly, women would need to work 12 more years to accumulate the average pension pot amassed by men, while single mothers face the prospect of 33 additional years in the workforce to achieve parity.
The report has pointed out that while pension income for certain groups has seen an increase since 2022, disparities with other pension savings persist.
Report author Samantha Gould noted: “While progress has been made in bringing more people into pension saving, significant inequalities remain. Many underpensioned groups continue to face systemic barriers that limit their ability to save for later life. These individuals are more likely to earn lower wages, work part-time, or take time out of employment for caring responsibilities, all of which contribute to lower pension savings and greater financial insecurity in retirement.”
To address these issues, the organisation is advocating for five policy changes. Their recommendations include abolishing the lower earnings limit for automatic enrolment contributions and factoring pension savings into divorce settlements.
Joanne Segars, chair of trustees at Now Pensions, cautioned: “Without further policy action, millions will continue to struggle to achieve a secure retirement. That’s why we’re suggesting key reforms, including removing the £10,000 auto enrolment earnings trigger, scrapping the lower earnings limit on pension contributions, and introducing a family carer’s top-up.
“These measures would help ensure that everyone, regardless of their working patterns or circumstances, has a fairer opportunity to build a financially secure future.”
