Millions of Britons could still be heading towards pension poverty despite recent improvements in retirement savings, experts have warned.
New research from Scottish Widows found that 12.2 million people remain at risk of not having enough money to cover basic needs in retirement.
Pension experts are now urging workers to carry out a “pension health check” and rethink how much they are saving before it is too late.
The firm’s latest Retirement Report found:
Although the figures are slightly better than last year – when 39% were considered at risk – experts warned many households are still dangerously underprepared.
The pension ‘magic number’ experts say matters most
Susan Hope said one of the biggest mistakes people make is not saving enough early enough.
She said: “As a rule of thumb, we suggest saving 15% of your salary to help reach a comfortable retirement.”
That figure includes:
Hope said even increasing contributions by an extra 1% or 2% could make a significant difference over time.
Hope said retirement planning often fails because people struggle to visualise what they actually want later life to look like.
She said: “Before diving into spreadsheets and sums, picture your ideal retirement.
“For some, it might be enjoying more time at home, while for others it’s European city breaks or long-haul holidays.”
Experts say creating a realistic picture of retirement can help people feel more motivated to save consistently.
Millions urged to do a ‘pension health check’
Scottish Widows is encouraging people to carry out regular pension “health checks” to understand whether they are on track.
The report found:
Hope said reviewing pensions regularly can help people:
She added that even people in their 40s, 50s and 60s can still significantly improve retirement outcomes.
Why tax relief gives pensions a major advantage
Experts also highlighted the tax benefits of pensions compared with other savings products.
When paying into a pension:
Hope said this means pensions can sometimes be more tax-efficient than ISAs for retirement saving.
She added: “The more time your money is invested, the more time it has to grow.”
The emergency savings warning many overlook
Alongside pensions, experts say households should also focus on building separate “side savings” for emergencies.
Hope warned unexpected costs can derail long-term financial plans if people do not have accessible cash savings.
She said: “An emergency fund is something we should all have.
“It helps with those unexpected costs without disrupting wider financial wellbeing.”
Pension poverty may improve – but experts warn risks remain
The Scottish Widows report found retirement prospects improved partly because:
But experts warned rising bills and global economic uncertainty could quickly reverse that progress.
Pete Glancy said: “The factors we can control, like how much we save, can easily be thrown off course by shifting external factors like increases to energy and general cost of living.”
Huge pension changes could be coming
The Government’s new Pensions Commission is now reviewing how to improve retirement outcomes across Britain.
Scottish Widows says one of the most important changes would be increasing auto-enrolment pension contributions from:
The company estimates this could:
Experts say younger workers would benefit most because their money would have longer to grow.
