Some 1.2 million Britons will not be able to afford a one-week holiday in retirement as their pension savings are estimated to not be enough.
About a million more people than a year ago are at risk of “falling short” of having a minimum lifestyle standard in retirement, new research found.
Scottish Widows used the retirement living standards produced by the Pensions and Lifetime Savings Association (PLSA) to make the finding.
The minimum standards under its definition are having enough income in retirement to cover basic needs with some leftover for fun.
For example, this includes being able to afford a one-week UK holiday and having £50 to spend a week on groceries or £95 as a couple. The minimum standard assumes that someone would not have a car.
The increase in those projected to fall short of the minimum standards has been driven by living costs rises, such as surging rents, the report said.
12.2 million households don’t have enough pension savings for a moderate living standard, but more than half of them have more than enough savings to boost their pensionGETTYIt added: “More people will be renting or carrying mortgage repayments on through retirement in the future.”
The research, which used a YouGov survey of more than 5,000 people across the UK in March and April, found that more than half (54 per cent) of UK retirees expect to work longer than they would like, on average by seven years.
The typical age that people say they would like to retire at is 62 but with current estimates, this seems impossible.
According to the PLSA, a single person will need to be able to spend about £14,000 a year to achieve the minimum living standard, £31,000 a year for moderate, and £43,000 a year for comfort. For couples, it’s 22k, 43k, and 59k.
Scottish Widows has suggested a roadmap to increase minimum contributions into pensions from eight per cent to 12 per cent, “with a strong steer that those who can afford 15 per cent should do so”.
Pete Glancy, head of pensions policy at Scottish Widows, said: “The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern.
“It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for. In the meantime, helping people to make the very most of what they have is going to be critical.”
He added: “At present, only the wealthiest tend to rely on professional support from a qualified financial adviser.
“As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.”
Not all savers are the same, they will have their own expectations and requirements when it comes to visualising their retirement.
The State Pension triple lock acts as a crucial safeguard against rising retirement living costs. With a significant 8.5 per cent increase to just over £11,500 annually from April 2024, the State Pension remains a substantial foundation of retirement income.
The State Pension triple lock, alongside improved annuity rates, will help median earners be able to achieve most aspects of the Moderate level.
According to the report, younger people would like to retire earlier with those aged 18-29 wanting to retire at 61 and only prepared to work until they reach 64, if necessary.
The increase in those projected to suffer the poorest retirement outcomes has been driven by rises in the cost of living relative to the growth in wages at an average of just 6.2 per cent, Scottish Widows revealed.