A looming pensions crisis is creeping up on the UK, with nearly half of working-age Brits on track to fall short financially in retirement, and many won’t realise the problem until it’s far too late, financial experts have warned.
New analysis from the Department for Work and Pensions (DWP) has revealed that 43% of working-age adults – equivalent to 14.6 million people – are undersaving for retirement. And it’s not just low earners feeling the pinch. Even among the top earners bringing in over £67,000 a year, nearly 1 in 2 (48%) are projected to fall short of what they’ll need later in life.
Scott Gallacher, Director at Rowley Turton, called the trend a “zombie retirement crisis” that’s “slow, quiet, and being ignored”, warning that a good salary now doesn’t guarantee a comfortable retirement.
“This is a massive threat. Auto-enrolment got people started, but contribution levels are too low and haven’t kept up with reality,” said Gallacher. “We’re heading for a future where millions simply won’t have enough to live on.”
The figures also show that future retirees are expected to be worse off than today’s pensioners, despite years of workplace saving. According to the DWP, private pension incomes for those retiring in 2050 could be 8% lower than those retiring today. Meanwhile, the State Pension is set to make up a growing proportion of retirement income, especially for lower earners.
This comes as the government faces mounting pressure to address pensions adequacy and rebuild momentum following the Turner Commission’s landmark work in the mid-2000s. While auto-enrolment was introduced off the back of that report, experts say it’s now in desperate need of reform and fresh ambition.
Mission impossible for savers
Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, blamed the cost of living crisis for making saving near impossible for younger generations. “It’s virtually impossible for anyone under 40,” he said. “Mortgage costs are higher, utilities have gone up, and day-to-day expenses are way above where they were five years ago.”
He added that many people “put off thinking about their pension until they’re five or ten years off needing it”, missing out on vital years of compounding growth. Without early action, he warned, we’ll see “more people working until they drop”.
The DWP also found huge disparities between different measures of pension adequacy. Using the PLSA’s Retirement Living Standards (RLS), a third of workers don’t even meet the minimum expected income, rising to 91% failing to meet the ‘comfortable’ standard.
Cut out the gobbledegook
Chartered Wealth Manager Philly Ponniah said it’s not down to apathy, but confusion. “The numbers are worrying, but they’re not surprising. There’s a real gap between intention and clarity,” she said. “We talk about ‘target replacement rates’ like everyone knows what that means, when most people are just trying to get through the week.”
Even among high earners, she added, there’s often an assumption “things will just work out” – a dangerous bet without proper planning.
Ross Lacey, Director at Fairview Financial Management, believes pensions suffer from a serious image problem. “People still see them as one-size-fits-all,” he said. “More awareness that pensions are just a savings wrapper, and that you can access a wide range of investments inside them, could really help shift the dial.”
But for many, structural inequality remains a roadblock. The report found that women who take career breaks or work part-time can end up with pensions that fall far below the target. A median-earning woman retiring at 60 after just five years off and five years part-time could end up with just 52% of the income she needs, far below the 67% benchmark recommended by the original Pensions Commission.
Less a gap than a looming crisis
Gosia Dawson, Director at Glade Financial, called it a crisis in waiting: “For women especially, the impact of time out of work and part-time jobs is huge. That’s not a gap, that’s a looming crisis.”
Still, she says it’s not too late to act: “Whether you earn £20,000 or £200,000, a clear plan can help close the gap. Auto-enrolment is just the starting point. We need better engagement with pensions and more personalised advice, especially for women.”
With the pension age likely to rise again, experts are urging the government to overhaul retirement education and empower people to take action before it’s too late.
As Mather-Holgate put it: “The government needs to roll out a proper education programme around retirement, and why it should be a priority.”
