Millions of British workers face a devastating retirement income shortfall, with fresh Government data revealing that vast numbers will struggle to afford even basic necessities in their later years.
The Department for Work and Pensions released figures last week exposing the scale of the looming catastrophe.
Around 14.6 million working-age Britons aren’t saving enough for retirement, raising serious concerns about the nation’s financial future.
Even more worrying, over one in ten workers are expected to fall short of the most basic standard of living when they stop working struggling to cover essentials like food, bills and housing.
The data suggests the UK is heading for a retirement crisis. Fewer than one in four people are on track for what industry body Pensions UK defines as a "comfortable" retirement, while less than one in ten are saving enough to fully achieve it.
Those due to retire in 2050 could see eight per cent less private pension income than today’s pensioners, despite benefiting from auto-enrolment schemes throughout their working lives.
The decline is largely driven by the steady disappearance of defined benefit pensions in the private sector.
Low earners are especially vulnerable. Just one in four private sector workers on modest incomes contribute to a pension, and nearly half are expected to struggle to meet basic needs in retirement, government analysis shows.
In total, 13 per cent of all workers will fail to meet even the "minimum" retirement standard, potentially leaving millions unable to afford essentials in later life.
The figures, which assess retirement adequacy using target replacement rates and industry living standards, include 33.6 million individuals when measuring against earnings replacement targets.
Tom Selby, director of public policy at AJ Bell, warned: "There's no escaping the fact that a chronic retirement under-saving crisis looms over the UK pensions system in its current form, and the latest government stats make for suitably grim reading."
In total, 13 per cent of all workers will fail to meet even the "minimum" retirement standard
| GETTYHe emphasised that the dwindling number of defined benefit schemes has contributed significantly to the problem.
He cautioned: "Without pension saving rates increasing quite dramatically, the vast majority of people retiring in the 2050s will be kissing goodbye to even some of the more modest luxuries included by Pensions UK in its definition of a comfortable retirement.
The self-employed face some of the most serious risks in the UK’s growing retirement savings crisis.
More than three million self-employed workers are not paying into any kind of pension, with over half lacking any private pension savings at all, according to estimates from the Institute for Fiscal Studies.
While some may have funds tied up in property, business assets or other investments, the long-term trend shows a worrying drop in engagement.
Only 39 per cent are currently on track for a comfortable retirement income | GETTYJust 20 per cent of self-employed workers earning £10,000 or more are contributing to a pension today, compared with 60 per cent in 1998.
Selby said: "Unsurprisingly, these figures also show the self-employed face a daunting climb towards a decent standard of living in retirement.
"In essence, all signs are pointing to a nation that will be ill equipped to retire in any way comfortably by the middle of this century, if not sooner. More needs to be done to ensure savers, particularly lower earners and the self-employed, can retire with a decent standard of living, rather than scraping by on the state pension alone."
To address the looming shortfall, the government has relaunched the Pension Commission to conduct a major review of the entire UK pension system. However, there is uncertainty around whether meaningful reform will arrive before the next general election.
Pension savers can take several practical steps now to boost their retirement prospects
| GETTYPension savers can take several practical steps now to boost their retirement prospects.
First, make full use of workplace pensions. Employees should check they’re enrolled and take advantage of employer contributions and tax relief, which can significantly grow their savings. As Selby explained, even a £100 monthly contribution, topped up to £125 through tax relief, could be worth nearly £52,000 after 20 years.
It’s also wise to review existing pension pots. Many people have multiple pensions from previous jobs. Consolidating them with a single provider can lower fees and simplify management.
Starting early and increasing contributions gradually makes a big difference. Even small increases, maintained consistently, can have a major long-term impact.
Selby added that opting out of workplace pensions should only ever be a last resort, as it means missing out on valuable employer contributions.
For the self-employed and basic-rate taxpayers, a Lifetime ISA can be a useful alternative. It offers a 25 per cent Government bonus on savings, and withdrawals after age 60 are tax-free.