The study found the retirement outlook has worsened since 2023, with 1.6 million more people risking retirement poverty. Two-fifths (39%) of people in the UK aren’t on track for a minimum lifestyle in retirement, worsening from 35% in 2023.
According to Scottish Widows, although pension saving levels have increased in the past 12 months, with projected retirement income rising to £17,200 from £15,500, they have failed to keep pace with the cost of living.
The Pension and Lifetime Savings Association (PLSA) estimates that a minimum retirement lifestyle would cost a single person outside London £14,800 per year in today’s money – excluding housing costs – leaving retirees with minimal funds after basic living costs.
The Scottish Widows report follows a warning from Standard Life that single pensioners need to save £225,000 more for retirement than their coupled-up counterparts.
The groups facing the worst retirement outcomes
- Generation Z
Most people in their 20s will be saving into a defined contribution pension through their employer, as well as relying on personal savings and the state pension.
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However, competing financial goals makes retirement savings a challenge. A quarter (25%) of people in their 20s prioritise saving for emergency expenses, while 13% aren’t able to save at all.
Under the National Retirement Forecast (NRF) projections, 42% of young people in their 20s are at risk of poverty in retirement and 23% will only be able to afford a minimum retirement lifestyle.
- Squeezed low-to-middle earners
Auto-enrolment has resulted in millions of people saving for the future, but the default contribution rate leaves minimum savers vulnerable. Squeezed low-to-middle earners, those on an income between £20,000 and £35,000 and in their 30s, are mostly likely (46%) to contribute the minimum 8%.
This group faces a 60% income drop in retirement on average, with 70% seeing their income halved. Amid financial pressures, 60% of people in their 30s know they aren’t saving enough, and 30% don’t save.
- Self-employed
The UK’s 4.39 million self-employed workers are still excluded from automatic enrolment, leaving many with poor retirement outcomes.
More than half (51%) are at risk of not being able to cover their basic needs in retirement and just 25% are on track for a minimum retirement lifestyle.
Two in five (39%) self-employed workers believe they aren’t saving enough for retirement, with 23% not saving anything at all.
Building financial empowerment is ‘crucial’
Pete Glancy, head of pensions policy at Scottish Widows, said: “There are three key areas that must be addressed urgently: auto-enrolment, self-employed contribution rates and housing, considering both homeownership 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.”
Brian Byrnes, head of personal finance at Moneybox, said: “The findings from Scottish Widows paint a stark picture of the UK’s worsening retirement outlook. With 1.6 million more people now at risk of retirement poverty compared to last year, the urgency for action has never been clearer – especially for groups like Gen Z, low-to-middle earners, and the self-employed.
“Although pension saving levels have technically risen, they simply haven’t kept pace with the cost of living. We urgently need to equip people with the tools, support and confidence to take control of their financial future. That starts with access to clear, personalised information – something the Government’s Pensions Dashboard can help provide.”
