Fifteen million UK adults are on course to fall below the minimum living standard in retirement, according to a new report — underlining the scale of the pension shortfall facing the UK workforce.
The findings, from pension firm Scottish Widows’ 2025 Retirement Report, show 39% of the adult population are not on track to meet even the minimum retirement income benchmark set by the Pensions and Lifetime Savings Association (PLSA).
That’s an increase from 35% just two years ago. Only 30% are likely to reach the more desirable “comfortable” standard, the report says — a lifestyle associated with holidays abroad, dining out and home improvements.
Younger Workers and Low Earners Most Exposed
The research reveals wide disparities in retirement outcomes. People in their 30s earning between £20,000 and £35,000 — a group more likely to contribute only the legal minimum to their pension — are projected to suffer the steepest income drops in retirement. A total of 70% of this group are expected to see their income halved, with some facing declines of over 60%.
Among workers saving around the default 8% contribution rate, 35% are not on track to meet even the minimum retirement income, while 48% will just reach the basic standard. Only 17% are expected to enjoy a retirement income above this threshold.
Self-employed people are especially vulnerable: 51% are not on track to cover their basic needs in retirement, and only 7% are forecast to achieve a comfortable lifestyle. They’re excluded from automatic enrolment and are significantly less likely to contribute regularly to a pension scheme.
Housing Costs Compound Inequality
The report reveals housing costs as a major factor affecting retirement readiness. Those still paying rent or mortgages into retirement may rely heavily on housing benefits, with projections showing the government’s annual housing support bill for pensioners could balloon from £6.1 billion to £38.2 billion if no action is taken.
Access to affordable social housing is cited as a potential solution. Average private rents are around £237 per week, compared to £118 for social housing. Redirecting some of these savings into pensions could increase future pots by over £36,000, the report calculates.
A quarter of respondents say they do not feel financially independent. Of this group, 44% believe they never will, often due to an inability to handle emergencies or save for the future. Young adults, renters, people with disabilities and those on low incomes are disproportionately affected.
The report finds that many people do not have enough in emergency savings — the average person believes they would need around £13,000, yet 45% say they fall short.
What Can Be Done?
Five policy interventions that could help tackle the retirement gap, the report advises, particularly for those with the most challenging financial outlooks:
- Develop an equivalent of automatic enrolment for the UK’s 4 million+ self-employed workers, currently excluded from the system.
- Bundle advice and financial products to help younger workers balance short-term resilience, home ownership and pension savings.
- Significantly expand the UK’s stock of social housing, to enable lower-income earners to save more and reduce future reliance on housing benefit.
- Develop a best-in-class pension product that combines the accessibility of personal pensions with the governance of occupational schemes.
- Create a combined regulator for all defined contribution pensions, to eliminate confusion and improve consistency across savings products.
“Pensions are a powerful tool for building wealth and financial resilience for retirement, but it’s important for everyone to consider their entire financial picture to face the future confidently,” Scottish Widows CEO Chira Barua says in the report.