More than one in three adults may struggle financially when they retire, a report has warned.
Some 35% of adults currently aged 22 to 65 risk having “less than the minimum needed” to pay for essentials such as bills when they become pensioners, according to research by Scottish Widows.
The pensions giant predicted many will still be paying rent in retirement and said that pressure on workers had only “intensified” due to inflation and rising interest rates this year.
It comes amid fears that many are not saving enough for later life, despite measures such as the introduction of auto-enrolment in workplace pension schemes for millions of workers in 2012.
The annual national retirement forecast from Scottish Widows found a further 18% of adults are on course for a “minimum” lifestyle when they stop working, which will just about cover basics such as bills while leaving them with some money left over.
Overall, its report found that the average man is set to receive £19,000 in income per year after they retire, compared to £12,000 for women
Pete Glancy, head of policy at Scottish Widows, said: “Our new national retirement forecast paints a stark picture – one in three of us are facing the harsh reality of a retirement where we will struggle to make ends meet.
“Last year’s retirement report highlighted the impacts of the pandemic, cost of living and wage stagnation. This year the pressure seems to have intensified due to increasing inflation and interest rates continuing to climb.”
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He added: “The financial services industry must get better at effectively communicating with diverse groups to build trust and ensure that people of all incomes and demographics understand how to save effectively for retirement.”
The research is based on a YouGov survey, commissioned by Scottish Widows, in which more than 5,000 British adults were asked about their preparations for retirement and their expectations of post-work life.
‘Retirement crisis’
The report estimated that a further 36% of adults are likely to have a “comfortable” lifestyle, with enough cash to pay for luxuries such as holidays, while the remaining 11% are on track to experience a “moderate” living situation in retirement.
Phil Brown, director of policy at workplace pension provider the People’s Partnership, said: “The possibility of a retirement crisis in the next 10 years and beyond will not be averted on its own.
“The cost-of-living crisis makes immediate action impossible but we need to use the next few years to work out how to solve the very real problem of under-saving.”
Scottish Widows also highlighted a sharp disparity in prospects for people with disabilities, who it said would on average need to manage on around 61% of the typical income of the wider population.
Louise Rubin, head of policy and campaigns at charity Scope, said action was urgently needed to ensure disabled people have an equal standard of living.
She added: “Life costs a lot more when you’re disabled, and planning for retirement is a luxury many cannot afford.
“Many disabled people are denied the opportunity to get into, stay in, and progress in work, making it much harder to build up a pension.”
A Department for Work and Pensions spokesperson said: “Automatic enrolment has transformed pension saving with more than 10.8 million workers signed up to a workplace pension and an extra £33bn saved in 2021 compared to 2012.
“We are supporting proposals to expand this so millions more save earlier, including young people, women and lower earners, while the free guidance on offer via MoneyHelper and Pension Wise is also helping people make informed choices about their financial futures.”
