A new government-backed report has revealed that millions of people across the United Kingdom are not saving enough for retirement, raising concerns that future pensioners could face worsening financial insecurity. The Pensions Commission stated that around 15 million Britons are currently under-saving for retirement, with the number potentially rising to 19 million if no action is taken.
Key findings of the report
According to The Guardian, the interim report warned that large groups across the UK risk facing a “severe cliff-edge” in later life due to inadequate pension savings and increasing financial pressures. The findings showed that about 45 per cent of working-age adults are not contributing to a pension, despite many being in employment. Low and middle-income earners were identified among the groups most at risk.
Self-employed workers particularly vulnerable
The report also highlighted concerns surrounding self-employed workers, revealing that only 4 per cent are paying into pensions. Savings levels among younger self-employed people were found to be particularly low.
Automatic enrolment system
Under the automatic enrolment system, employers are required to place eligible workers into workplace pension schemes with minimum contributions of 8 per cent of earnings. Employees contribute 5 per cent, while employers pay 3 per cent. However, the commission warned that minimum contribution levels may still leave many workers financially vulnerable in retirement.
Early withdrawals and gender gap
The report also found that many people are accessing pension savings at the earliest opportunity. Around 30 per cent of private pension pots are reportedly withdrawn early, with much of the money spent on large purchases such as holidays, cars and home improvements. Additionally, the findings pointed to a significant gender pensions gap. Women approaching retirement were reported to have average private pension savings of about £81,000, compared with roughly £156,000 for men.
Call for renewed national settlement
Jeannie Drake, who leads the commission review, said Britain needed a “renewed national settlement on pensions” to help secure adequate retirement incomes in the future. Pensions minister Torsten Bell added that younger generations remained at risk of becoming poorer in retirement than current pensioners.
The commission, first established under former prime minister Tony Blair in 2002, was revived last year by Prime Minister Keir Starmer amid growing concerns over long-term retirement savings in Britain.
