Retirement crisis: One in five face poverty in later life as savers forced to rely on state pension alone

PensionBee's research, a leader in the consumer retirement market, revealed a deepening divide in the UK’s pension system.

The study found that only 16 per cent of those earning below £15,000 make regular contributions to personal pensions.

The findings highlight a gap in retirement savings between self-employed and gig workers compared to employees in traditional jobs.

Many gig workers are excluded from auto-enrolment into workplace pensions, limiting their access to retirement savings schemes.

The report was released as the Government’s revived Pensions Commission continues its review of retirement adequacy across the UK.

PensionBee's data outlined the possible need for changes to support workers with irregular income patterns.

The research showed that 18 per cent of the lowest earners are unable to set aside any money for retirement.

Rising living costs were cited as the main barrier to saving across all income brackets.

Among younger adults, 23 per cent of those aged 18 to 24 said financial pressures prevent them from making pension contributions.

Generational differences also appeared in family dependency.

Twenty-two per cent of young adults said they expect to rely on relatives in retirement, compared with 3 per cent of those aged 65 and over.

Workers on higher incomes reported greater confidence about their financial future.

Only 18 per cent of those earning £15,000 or less expressed strong confidence in their retirement prospects, compared with 39 per cent of workers earning £100,000 or more.

Fewer than half of high earners contribute regularly to pensions, at 46 per cent, but their participation rates remain much higher than those on lower incomes.

PensionBee found that the current system isn't straightforward for self-employed and low-paid workers, making it harder for them to build long-term savings.

More accessible savings products and improved financial education could help close the gap.

More than half of workers earning between £15,000 and £19,999 said they would be more likely to save if they had the option to "contribute small, flexible amounts".

PensionBee found that this reflects the unpredictable income patterns typical of gig economy workers.

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Lisa Picardo, chief business officer UK at PensionBee, said: "While auto-enrolment has transformed retirement savings for millions of employees, millions of others remain excluded from the system, particularly the self-employed.

"These workers deserve the same chance to build a secure retirement, but face additional barriers when it comes to starting and sustaining contributions."

One proposal under consideration would allow self-employed workers to make pension contributions through self-assessment tax returns.

The full state pension is currently worth £230.25 a week for those reaching retirement age.