Around 12.2 million adults across the UK are at risk of being unable to cover their basic financial needs in retirement, according to new research from Scottish Widows. The findings suggest that while retirement prospects have improved slightly over the past year, millions of people remain financially vulnerable later in life.
The report, based on a survey of around 6,000 people aged between 22 and 65, found that 31% of UK adults are still at risk of what it describes as “pension poverty”. According to Scottish Widows, this marks an improvement from last year, when 39% of people were estimated to be off track for even a minimum retirement lifestyle.
Part-Time Workers and Self-Employed People among the Most Exposed
The Scottish Widows National Retirement Forecast used retirement living standards developed by Pensions UK to compare expected retirement income against projected living and housing costs. According to the report, some groups are significantly more exposed to financial hardship in retirement than others.
Fewer than one in five full-time employees are currently at risk of pension poverty. By contrast, more than a third of people working part-time or those who are self-employed are projected to fall below minimum retirement living standards.
The report stated that many of these workers are outside the current automatic enrolment system for workplace pensions. People in part-time jobs below the earnings threshold are not automatically enrolled, while self-employed workers are also excluded from the scheme.
Researchers also highlighted the financial vulnerability of people living with health conditions. According to Scottish Widows, half of adults whose physical or mental health affects daily life face pension poverty in retirement.
Pete Glancy, head of pension policy at Scottish Widows, described the findings as “a complex picture”. He said the recent improvement in retirement outcomes could easily be reversed by external pressures, including increases in energy bills and wider living costs.
According to the report, lower household energy costs contributed to the improved outlook this year by reducing the benchmark for expected retirement spending. At the same time, some households benefited from pay rises, increased savings outside pensions and higher rates of homeownership.
Experts Urge Workers to Review Savings and Increase Contributions
Financial specialists involved in the report said people should regularly review their pension arrangements and consider increasing contributions where possible. Susan Hope, quoted in coverage of the findings, said a common problem is that many workers do not begin saving enough early in their careers.
She said a general target of saving 15% of salary towards retirement could help people achieve a more comfortable standard of living later on. This figure includes personal contributions, employer payments and tax relief provided by the Government.
According to Scottish Widows, increasing workplace pension contributions through automatic enrolment from 8% to 12% could substantially improve retirement outcomes. The company estimated that such a change could add around £40,000 on average to retirement savings pots, with younger workers potentially gaining much more over time.
The report also stressed the role of non-pension savings and housing wealth in supporting retirement income. Glancy said pensions “can no longer be viewed in isolation” and argued that broader financial planning would be necessary to improve retirement outcomes across the UK.
Helen McGinty, head of financial advice distribution at Skipton Building Society, said early planning gives people more flexibility in retirement and allows them to better manage changing health and lifestyle needs over time.
