Nearly two in five 'not on track to afford even a minimum lifestyle when they retire’

Nearly two in five (39%) people are at risk of being unable to cover even their basic needs in retirement, according to a report from Scottish Widows.

The projected outcome has worsened compared with 2023, when just over a third (35%) of people were thought to be on course to fall short of having a minimum lifestyle in retirement.

Pension savings levels have failed to keep pace with the rising cost of living, according to Scottish Widows, which published the research.

Low- to middle-income earners and people under the age of 40 could be at particular risk of falling short of having a lifestyle in retirement that covers even their basic needs, the report warned.

People who identify as LGBTQ+, people with disabilities and people from black communities are particularly likely not to be on track for a minimum lifestyle in retirement, the report said.

Part-time and self-employed workers are more likely to face worse retirement outcomes than full-time workers, the research indicates.

The report also highlighted housing costs as a significant barrier to meeting basic retirement outcomes. Some people may face paying mortgages or rent into their retirement, with high housing costs also making it tougher to save during people’s working lives.

Differences in retirement prospects across the UK were also found.

The proportion of people estimated to be on track to have at least a minimum lifestyle in retirement ranged from just over half (52%) in both Northern Ireland and the North East of England to more than two-thirds (68%) in the East of England.

Scottish Widows teamed up with Frontier Economics and used a YouGov survey of more than 5,100 people across the UK in January and February.

Researchers also used the retirement living standards set out by the Pensions and Lifetime Savings Association (PLSA). The standards were developed to help pension savers picture what kind of lifestyle they could have in retirement and sets out three retirement standards – basic, moderate and comfortable.

The Scottish Widows report indicated that just over a fifth (22%) of people across the UK may end up with a minimum lifestyle in retirement – which would mean having enough money to cover basic needs, with some money left over for non-essentials.

One in 12 (8%) is on track for a moderate lifestyle – which is the next step up and would mean having more financial security and wriggle-room in their budget.

Three in 10 (30%) are estimated to be on track for a comfortable retirement lifestyle – which is the most affluent of the three retirement lifestyles, with more financial freedom and room for luxuries.

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.”

He added: “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.”

– Here are the proportions of people who are estimated to be on track for at least the minimum PLSA retirement living standards in UK nations and regions, according to Scottish Widows:

Northern Ireland, 52%

North East, 52%

South West, 54%

Wales, 56%

West Midlands, 58%

London, 59%

North West, 59%

Scotland, 61%

East Midlands, 64%

Yorkshire and the Humber, 66%

South East, 66%

East of England, 68%