The Pensions Commission has warned around 15 million people are not saving enough for retirement today – a figure that could rise to some 19 million by the 2050s.
Louise Farrand, executive director at the Defined Contribution Investment Forum, said we are facing a “ticking pensions timebomb”, while Rachel Vahey, head of public policy at AJ Bell, said the latest is a “stark warning” that millions of people are heading towards retirement without enough money to maintain their standard of living.
“Continuing as we are is simply not sustainable,” she said.
Figures from the Pensions and Lifetime Savings Association (PLSA) show that a person living independently will require £13,400 per year for a minimum standard of living. This rises to £31,700 for a moderate retirement and £43,900 for a comfortable one. For couples, these figures stand at £21,600, £43,900 and £60,600 respectively between two people.
Experts agreed that automatic enrolment has been successful in getting more people saving for retirement but warned that people are not putting enough away.
Claire Trott, head of advice at St. James’s Place, noted that minimum contribution levels risk “becoming seen as a sufficient rather than a baseline”. The firm’s Financial Health report found 12% of people are not currently saving for retirement, with just one in five people contributing regularly to their pension.
Jon Greer, head of retirement policy at Quilter, added: “Too many people are contributing at minimum levels that are unlikely to deliver adequate retirement outcomes, creating a dangerous gap between perception and reality.
“People feel like they are doing the right thing, yet many remain on course for a retirement that falls short of expectations.”
Low and middle earners are most at risk, with around half saving only at minimum automatic enrolment levels, but the figures are most shocking among self-employed people, where only 4% are saving for retirement at all.
Vahey said the report was right to highlight the “crisis” among the self-employed, where millions are not saving into pensions at all.
“This has been a known problem for years but governments and industry still have not found a workable solution for people with irregular incomes and competing financial pressures,” she said.
Meanwhile, the pension gender pay gap remains a real issue. The report found the pension pots of women in their late 50s are 48% smaller than those of equivalently aged men. Data from AJ Bell found women start to fall behind as early as 28 years old.
Lastly, the report also warned of people accessing their pension early, which was exacerbated by pre-Budget speculation that the state pension triple-lock could be scrapped, said Vahey.
The Pension Commission is expected to publish its final report early in 2027, but commissioner Jeannie Drake today called for a “renewed national settlement on pensions”.
Greer noted the report is a warning and “what matters now is whether government is willing to act decisively across contribution levels, system design and policy stability”.
Trott added that “reform is needed” as for many people, pensions are still viewed as “complex and inaccessible”. However, she noted that any changes must “maintain confidence in the pensions system”.