More than 12 million adults in the UK are at risk of being unable to cover their basic financial needs in retirement, according to a new report from Scottish Widows. The analysis estimates that around 12.2 million people face 'pension poverty', though this marks an improvement from 15.3 million the previous year.
Key Findings
The improvement is partly attributed to non-pension factors such as pay rises, increased savings, higher homeownership rates, and lower energy costs reducing the benchmark for living expenses. However, researchers caution that progress could be reversed as global events push energy prices upward again.
The Scottish Widows national retirement forecast uses retirement living standards from Pensions UK to project outcomes for people aged 22 to 65, based on a survey of around 6,000 people conducted by YouGov in February.
Vulnerable Groups
Certain groups are particularly at risk. Fewer than one in five full-time employees face pension poverty, but over a third of part-time or self-employed workers do. Additionally, half of those with physical or mental health conditions affecting daily life are at risk.
The report notes that part-time workers below the earnings threshold and the self-employed are not automatically enrolled in pension schemes, contributing to their vulnerability.
Policy Recommendations
Scottish Widows recommends increasing automatic enrolment contributions from 8% to 12% of earnings and creating a similar system for the self-employed. Pete Glancy, head of pension policy, emphasized that pensions should be considered alongside other savings, investments, and housing wealth.
Helen McGinty of Skipton Building Society advised starting retirement planning early to increase options and flexibility later in life.
