Pension warning to 12.2 million Brits – ‘you’re unlikely to have enough’ | Personal Finance | Finance

Millions of people across the UK are being warned they may not have enough saved for retirement. Scottish Widows’ latest annual Retirement Report has found that 31% of UK adults, around 12.2 million people, are on track for a less than minimum retirement lifestyle. While that marks an improvement from 39% (15.3 million people) in 2025, the report says a third of people still face pension poverty in later life.

The findings come as the UK Government’s recently established Pensions Commission is expected to recommend changes to improve retirement outcomes. The report is based on the latest National Retirement Forecast (NRF), which projects retirement outcomes based on savings, behaviours and income sources, and compares expected income to potential living and housing costs in retirement. Scottish Widows said the reduction in the number of people facing pension poverty has been driven by two key factors.

Firstly, more people who are not saving through a traditional pension have increased savings elsewhere, and more now expect to own their own home in retirement.

Secondly, falling short-term energy costs have meant more people meet the minimum lifestyle standard set out by Pensions UK’s Retirement Living Standards. However, the report warns that rising global energy prices could reverse that progress.

Pete Glancy, the head of pension policy at Scottish Widows, said: “This report paints a complex picture. While the fall in pension poverty compared to a year ago is a step in the right direction, this shift in retirement fortunes is complex, and the current state of the nation’s savings is still polarised.

“The factors we can control, like how much we save or how much we expect to receive in retirement, may improve, but can easily be thrown off course by shifting external factors like increases to energy and general cost of living.”

The firm said increasing automatic enrolment contributions could significantly reduce pension poverty.

Currently, the statutory auto-enrolment saving rate is 8%. Scottish Widows estimates that raising this to 12% on the first £30,000 of salary would increase average projected retirement savings by £40,000. For those aged 22-29, pension pots could rise to around £114,000 at retirement.

Its analysis shows that among defined contribution (DC) members saving below 12%, increasing contributions from 8% to 12% across total salaries would reduce pension poverty from 32% to 13%, with an average increase of £65,000 in pension pots.

If applied only to the first £50,000 of salary, average pots would increase by £55,000 and pensioner poverty would fall to 14%. The remaining 13% at risk are mainly self-employed, part-time or unemployed people.

Scottish Widows is calling for the creation of an equivalent of auto-enrolment for the self-employed, as well as better compatibility between pensions and other financial products such as savings, investments and housing equity.

Mr Glancy added: “The way people are working continues to evolve, but our retirement system still lags behind. This year, we have modelled the impact of some policy changes only on the youngest workers, as this gives us the best indication of the long-term benefit applying not only to them, but all future generations yet to join the workforce.

“We must also ensure that choosing flexibility today – through self-employment or part-time work – doesn’t come at the expense of tomorrow. Extending auto-enrolment to the self-employed, as is one of our recommendations to the Pension Commission, is critical and should be implemented at pace to close this gap in retirement saving.

“Most people are unlikely to have enough in their pension pots alone to fund their desired retirement, so pensions can no longer be viewed in isolation. Considering pensions alongside other savings, investments and housing wealth – and advancing the Government’s Open Finance agenda – will be key to improving retirement outcomes for all.”

Following the publication of the report, Angeline Ong, senior technical analyst at IG, said: “While recent figures from Scottish Widows suggest an 8% decline in the number of people facing pension poverty, the underlying picture remains deeply concerning.

“Around one in three people across the UK are still at risk. Many people simply save less than they think they need for retirement, not through neglect, but because inflation and regulation steadily erode the value of their pension pot.”

She added: “One encouraging trend reflected in the Scottish Widows data is that many people who are not building wealth through traditional workplace pensions are finding other ways to save and invest. However, the growing instability in the Middle East risks keeping inflation higher for longer – and history shows it’s very hard to get the inflation genie back in the bottle once it’s out.

“From 2028, the minimum pension access age will rise to 57, creating what is effectively a double hit for savers. Not only are people living longer, meaning retirement savings need to stretch further, but access to pension funds is also being pushed further out of reach. In practical terms, many people may now need their retirement income to last 25 to 30 years – or even longer.

“Building a stocks and shares ISA alongside a pension can play a critical role in closing that gap before pension access begins. Workplace pensions remain highly valuable, particularly where employer contributions are matched, but ISAs offer greater flexibility and tax-efficient access to capital when needed.

“The most effective approach is usually a balanced strategy that takes into account earnings, retirement ambitions, and future tax exposure.”