Significant numbers of people risk a retirement 'cliff edge' drop in income when they stop working, according to Pensions UK. The industry body issued the warning as it published updated 'retirement living standards' to help people understand the lifestyle they can expect in retirement.
The standards, calculated by Loughborough University's Centre for Research in Social Policy, outline three levels: minimum (basic needs plus some discretionary spending), moderate (more financial security and flexibility), and comfortable (financial freedom and some luxuries). For a single person, the minimum costs £13,900 annually, moderate £32,700, and comfortable £45,400. For couples, the figures are £22,500, £45,400, and £62,700 respectively.
Pensions UK estimates that 82% of working-age people will achieve at least the minimum standard, but only 23% will reach moderate and 9% comfortable. It called for more action to close the savings gap, including employers offering matching contributions above minimum levels. Housing costs are excluded from the standards due to wide variations.
Zoe Alexander, executive director at Pensions UK, said: 'The latest update underlines a clear reality – today's saving levels will not be enough for the retirement they expect. Without action, too many risk facing a cliff edge drop in income when they stop work.' She urged people to ask employers about higher pension contributions.
Industry experts echoed the concerns. Jamie Jenkins of Royal London noted that while many are on track for a minimum standard, 'overall financial resilience in retirement is still a long way off'. Andrew Prosser of InvestEngine highlighted that millennials are often less engaged with pensions than other generations, despite being the first to spend most of their working lives under auto-enrolment.
