More than 12 million adults in Britain are facing pension poverty, according to Scottish Widows' latest Retirement Report. The study found that 31 per cent of people – equivalent to 12.2 million – are likely to fall short of a 'minimum retirement lifestyle', struggling to cover basic needs such as food and fuel. While this figure has dropped from 39 per cent in 2025, the report warns that rising fuel inflation could reverse progress.
Pension poverty is defined as a household income 60 per cent below the median after housing costs, roughly £10,000 for an individual or £17,000 for a couple. The improvement in this year's projections is partly attributed to lower short-term energy costs and higher non-pension savings, with more people expecting to own their homes outright by retirement.
However, Scottish Widows cautioned that the nation's retirement savings remain deeply uneven. Pete Glancy, head of pension policy, said: 'The current state of the nation's savings is still polarised. The factors we can control, like how much we save, can easily be thrown off course by increases in energy and wider living costs.'
The insurer is urging the government to increase minimum auto-enrolment pension contributions from eight per cent to 12 per cent of earnings. It estimates this could cut pension poverty from 31 per cent to just 13 per cent among defined contribution savers, adding an average £40,000 to retirement pots and up to £114,000 for younger workers.
Patrick Thomson of Standard Life echoed the concern, warning that the retirement income crisis is expected to worsen in the 2040s as Generation X enters retirement with low savings. He called for a clear government plan to support vulnerable groups and help older workers stay in employment.
The report also highlighted gaps for self-employed and part-time workers, a third of whom face below-minimum living standards in retirement. Scottish Widows called for an 'equivalent of auto-enrolment' to ensure modern working patterns do not come at the expense of retirement security.
