Pension disaster as 12 million retirees face poverty in later life, shocking research finds

Non-pension savers have benefited from modest wage increases, higher levels of savings outside pension schemes, and greater rates of homeownership.

Reduced energy costs have additionally lowered the threshold for household living expenses, though researchers warned that global developments pushing energy prices upward could quickly reverse these gains.

The forecast, based on a YouGov survey of roughly 6,000 people conducted in February, assessed retirement prospects for individuals aged 22 to 65.

Certain demographic groups face significantly higher risks of retirement poverty, the report revealed. Among full-time employees, fewer than one in five are projected to experience pension poverty.

However, the outlook is considerably bleaker for those in part-time work or running their own businesses, with more than a third facing retirement incomes below minimum standards.

The report noted: "While increases to contribution levels under automatic enrolment can reduce pension poverty, it's important to remember that those self-employed and those that work part-time jobs below the earnings threshold are not currently automatically enrolled."

People living with physical or mental health conditions affecting their daily lives are particularly vulnerable, with half facing pension poverty.

Pete Glancy, head of pension policy at Scottish Widows, said: "This report paints a complex picture. While the fall in pension poverty compared to a year ago is a step in the right direction, this shift in retirement fortunes is complex and the current state of the nation's savings is still polarised."

He cautioned that controllable factors such as savings rates and expected retirement income can be derailed by external pressures including rising energy and living costs.

Scottish Widows has called for the statutory workplace pension contribution rate under automatic enrolment to be raised from eight per cent to 12 per cent. The organisation also advocates establishing an auto-enrolment equivalent for self-employed workers.

Mr Glancy added: "Most people are unlikely to have enough in their pension pots alone to fund their desired retirement, so pensions can no longer be viewed in isolation."

Helen McGinty, head of financial advice distribution at Skipton Building Society, said: "The earlier you start planning, the more options and flexibility you'll have later on."

A Department for Work and Pensions (DWP) spokesperson said the Pensions Commission is currently exploring ways to secure retirements for future pensioners.

The recently enacted Pension Schemes Act is expected to deliver major reforms benefiting millions of workers by up to £29,000 by retirement.