One in three facing hardship in retirement

Scottish Widows has today released new data, that shows that one in three (35%) of adults currently aged 22-65 risk having less than the minimum needed to pay for essentials when they retire. 

The research found that many societal groups –such as renters and young people –are disproportionately facing hardship, while others such as millennials are saving well for retirement.

Almost half (43%) of the people predicted to struggle in retirement expect to be still paying rent with rental costs amounting to 60-70% of renters’ retirement income in several parts of the country, but this figure to 130% in London.

Almost half (41%) of people currently in their 20s are heading for hardship in retirement, with an average retirement income of £10K among this group. Whilst 43% of millennials are on track for a comfortable lifestyle, reflecting strong savings behaviours and the benefits of automatic enrolment.

On average, women will receive a third less income in retirement than men (£19K vs £12K). Whilst half (49%) of people have not checked whether they are entitled to the full state pension.

Meanwhile, self-employed people generally lack formal incentives to save adequately compared to full-time employees. Bringing this to life, the average full-time employee is on track to receive £27k a year in pension income –nearly three times what the average part-time employee and the average self-employed person are on track for (£11k and £10k respectively.

It seems that living expenses remain a real concern for a large majority (75%) of people, which could be affecting retirement preparation. Against the backdrop of ongoing economic uncertainty, a worrying minority (21%) is also cutting back on essentials –up from 16.5% in 2022.

Pete Glancy, Head of Policy at Scottish Widows, said “Our new National Retirement Forecast (NRF) paints a stark picture –one in three (35%) 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.

“The solution needs to be threefold. We are calling on the Government to help end retirement poverty by implementing long-term reforms, such as ensuring that automatic enrolment can support those on lower incomes. Secondly, businesses need to do more to address the inequalities faced in the workplace by disadvantaged groups like women, disabled people and the LGBTQ+ community. Finally, 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.”

Louise Rubin, Head of Policy and Campaigns at Scope, said “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.We need to break the link between poverty and disability and make sure disabled people have an equal standard of living. Tackling the disability employment gap and driving down the extra cost of disability must be made political priorities.”