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Half of UK workers not saving enough for retirement

by Benefits Expert
08/05/2025
financial wellbeing, money health check, ill piggy bank
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Gen Z, low to middle earners and self-employed people are most at risk of a retirement in poverty, as half of UK employees admit they are not saving enough, according to the annual Retirement Report from pension provider Scottish Widows. 

The warning comes as increases in living costs have hit people’s ability to save. Figures for 2024 show that 39 percent of  people in the UK will not be able to afford the most basic lifestyle in retirement, which is an increase from 35 percent of people being in this position in 2023. The report found that 15.3 million people “are at risk of retirement poverty”. 

Pension savings have increased in the past 12 months, with projected retirement income rising to £17.2k from £15.5k. However, this rise has not kept up with the soaring cost of living.

Estimates from the Pension and Lifetime Savings Association (PLSA) show that a single person living outside London would need £14.8k a year in today’s money to have a ‘minimum lifestyle’. This covers your basic needs and could leave you with money to be able to go on holiday in the UK, eat out once a month and do some affordable leisure activities about twice a week, but it excludes housing costs like rent or mortgage. 

The pension provider found that 50 percent of people in the UK know they are not saving enough for retirement. However, the situation is more severe for Gen Z (born between 1997 and 2012). 

The report said that while most young people will have been auto-enrolled into a defined contribution pension through their employer, they are not saving enough for the future, instead expecting to fall back on personal savings and the state pension. 

In fact, competing financial goals means that this age group finds it difficult to save for retirement. A quarter of people in their 20s prioritise saving for emergency expenses, while 13 percent are not in a position to save anything. Researchers found that for this age group, the main savings goals are emergency funds, house deposits and holidays. 

The report said that under the National Retirement Forecast (NRF) projections, 42 percent of people in their 20s are at risk of poverty in retirement and 23 percent will only be able to afford a minimum retirement lifestyle. 

Employees classified as ‘low to middle earners’ are also facing a savings squeeze. Pensions auto-enrolment may have led to millions of people saving for the future, but if people stay on the default contribution rate they may not be saving enough for retirement. The report said that financially squeezed low to middle earners, which is people on an income between £20,000 and £35,000 and in their 30s, are mostly likely (46 percent) to contribute the minimum 8 percent (employer contributes 3 percent and employee contributes 5 percent). 

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As a result of undersaving, this group of workers could see an income drop of 60 percent when they retire, with income reducing by half for 70 percent of this group. 

Three fifths of people in their 30s are aware they are not saving enough, and 30 percent don’t save at all.

Scottish Widows said that greater financial empowerment will be crucial in tackling retirement under saving. By empowering more people to take control of their finances, they would be able to plan effectively for retirement. However, the research showed that while 69 percent of people feel financially independent, a quarter still do not. And, 44 percent do not believe they will ever be able to achieve financial independence. 

Pete Glancy, head of pensions policy at Scottish Widows, said: “Our research couldn’t be more timely, spelling out just how crucial targeted measures are in preventing millions from living in retirement poverty in the coming years. The second phase of the government’s Pensions Review must be broad enough to take a holistic view on people’s financial journey through life considering wide-ranging financial goals. There are three key areas that must be addressed urgently: auto-enrolment, self-employed contribution rates and housing, considering both home ownership and affordable housing.

“For now, the challenge is helping people make the most of what they have. It is essential to ensure people feel financially empowered to make informed decisions and take proactive steps for their future – with a strong sense of financial independence playing a key role.”

Savings increase ‘not touching the sides’
Paul Leandro, partner at Barnett Waddingham, said: “Pension saving levels are increasing, but it’s still not touching the sides. The rising cost of living, persistently low contribution rates, and growing apathy means millions of future retirees still aren’t on track to achieve an adequate income in retirement. And with 1.6 million more people now at risk of retirement poverty, was this the final wake up call we needed?

“Year in, year out, the inadequacy of pension contributions is a concern we see – and without clear, decisive action for change, the ticking timebomb of the UK’s pension system could soon blow up in our faces.”

Leandro added: “To top it off the situation is even more dire for the self-employed – millions of whom are lacking the safety net that auto-enrolment into a workplace scheme provides employed workers.

“The new pensions minister’s commitment to addressing retirement adequacy is a welcome message, but the devil will now be in the detail. We cannot afford another year of delays or policy inertia – or a Dickensian future is on the cards where people are forced to work well into old age just to make ends meet.”

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