Millions of British workers are on course for retirement incomes significantly below what experts consider adequate, according to a stark warning from online pension provider PensionBee.
The company issued its findings in response to an All-Party Parliamentary Group inquiry examining retirement income levels across the UK.
PensionBee’s analysis reveals a troubling disconnect between what savers expect from their pension pots and the reality they will face upon leaving work, with retirees facing a £26,000 retirement savings shortfall.
The retirement savings specialist has highlighted that current pension accumulation rates leave a substantial shortfall when measured against established industry benchmarks for acceptable living standards in later life.
Britons are being warned about the looming ‘gulf’ in pension savings
|
GETTY
According to PensionBee’s data, the typical pension pot at retirement stands at approximately £88,000. Combined with state pension payments, this sum translates to roughly £18,000 per year in retirement income.
Industry standards paint a very different picture of what retirees actually require, with the Pensions UK Retirement Living Standards indicating that a single person needs close to £32,000 annually to maintain a moderate lifestyle after leaving work.
Those aspiring to a comfortable retirement face an even steeper target, with the benchmark set at nearly £44,000 per year.
Analysts note the disparity represents a considerable gulf between what workers are saving and what they will ultimately need.
Britons are struggling in retirement | GETTY
Several factors continue to erode people’s capacity to prepare adequately for their post-work years, PensionBee’s submission notes.
Unpredictable life expectancy, rising prices, and fluctuating investment markets all contribute to planning difficulties.
Although pensions remain the principal income source for most retired individuals, the options available when leaving employment are complicated and often overwhelming.
Professional financial guidance carries costs that put it beyond many savers’ reach.
Consequently, workers frequently settle for convenient rather than optimal choices, or adopt overly cautious strategies that ultimately constrain their later-life living standards.
Frozen tax thresholds add further strain, while growing numbers of people continue working past state pension age through financial necessity rather than preference.
Ongoing instability in pension tax policy risks worsening outcomes by pushing savers toward short-term thinking that reduces their eventual income, the company warns.
PensionBee is urging policymakers to introduce more intuitive default retirement options, maintain consistent pension taxation rules, and provide earlier, more accessible guidance to help workers make informed decisions before reaching retirement.
How much could you save? Pension pot | GBN
Lisa Picardo, the chief Business Officer UK at PensionBee, said: ““Too many people are approaching retirement with expectations that simply don’t match the reality of their savings.
“The gap between what people need for a reasonable life in retirement, and what their pension is likely to deliver them as an income, is growing – yet individuals are still expected to navigate complex decisions at a time when their confidence is often lowest.”
“Set against an economic backdrop characterised by volatility and uncertainty, and faced with the pressure of rising costs of living,, the need for stability and clarity in pension policy has never been more important.
“Without clearer information, earlier guidance and support that is easy to access and understand, many savers will continue to make short-term focused, or overly cautious, decisions that may limit their income in later life.”