Three-Quarters of UK Workers Not on Track for Moderate Pension Income, Report Warns

More than three-quarters of working-age individuals in the UK are not on course to save enough for a "moderate" retirement lifestyle, according to a new report from the pensions trade body Pensions UK. The analysis estimates that just 23% of the working population will achieve that standard, which costs £32,700 annually for a single person and £45,400 for a couple. Rising bills have pushed up the cost of retirement, the report said, intensifying calls for action to boost retirement savings and prevent what the trade body described as a "cliff-edge drop in income" when people stop working.

Moderate Lifestyle Threshold Widely Missed

The report defines a moderate retirement lifestyle as one that includes a couple's weekly groceries, a week's holiday in the UK, eating out about once a month, and affordable leisure activities roughly twice a week. These calculations are developed and maintained independently by the Centre for Research in Social Policy at Loughborough University and are intended as a guide for those planning retirement savings. Pensions UK estimated that 82% of the working population would reach the minimum retirement standard, which costs around £13,900 annually for a one-person household and £22,500 for two people. However, far fewer will go beyond that level, the report warned. "Far fewer will go beyond that. That is out of step with what people expect for their future. Without action, too many risk facing a cliff-edge drop in income when they stop work," said Zoe Alexander from Pensions UK.

Comfortable Retirement Attainable for Only 9%

A comfortable lifestyle in retirement is estimated to cost £45,400 for a single person and £62,700 for a couple, according to the report. Only 9% of workers are projected to reach that income level after tax. The trade body stressed that the incomes needed for each standard had increased compared with a year ago, primarily due to the rising cost of food and socialising. These increases were broadly in line with rising prices as measured by inflation, though housing costs are excluded from the calculations. "This means it is important for individuals to use the standards as a guide and adjust them to reflect their own situation, particularly where additional housing costs are likely to be a key factor," Pensions UK said.

Calls for Action Across Employers, Government, and Workers

The trade body suggested that workers, employers, and the government could step up efforts to encourage and contribute to more saving for retirement. Pension providers currently send annual statements estimating the annual income someone's savings will generate in retirement. Last year, the government said it was reviving the "landmark" Turner Pension Commission, which reported in 2006 under the last Labour government and led to the rollout of automatic enrolment into pension saving. Ministers and the commission's interim report indicated that people are not saving enough for retirement, with individuals drawing their pension 25 years from now set to be £800, or 8%, worse off per year than their counterparts today, according to the government.

State Pension and Gender Gaps in Savings

The report highlights that the state pension, governed by the triple lock mechanism, remains a key component of retirement income for many. However, significant disparities persist. Tax authority figures suggest women have about half the amount of money saved in pensions as men. Investment platform AJ Bell has found that age 28 is when women start to fall behind men in saving for retirement. The trade body's analysis underscores the need for sustained saving efforts across all demographics to close the retirement savings gap and improve pension adequacy.

Context

The findings echo long-standing concerns about retirement preparedness in the UK. The Turner Pension Commission's original 2006 report warned of widespread under-saving and led to automatic enrolment, which increased participation but not necessarily contribution levels. Similarly, a 2024 report from the International Longevity Centre estimated that over 40% of UK households are not saving enough for a minimum standard of living in retirement, reinforcing the persistent gap between expectations and outcomes.