Government warning as future pensioners face shortfall
By Alistair McQueen, Head of Savings & Retirement at Aviva
A warning from the UK government has reignited a national conversation: people retiring in 2050 could be significantly worse off than today’s pensioners, unless action is taken to boost retirement savings.
Despite the success of automatic enrolment, which now sees 88% of eligible employees saving into a pension, millions remain at risk of falling short in later life. The Department for Work and Pensions (DWP) has announced the revival of the Pensions Commission to tackle this growing challenge, reporting back its findings on private pensions in 2027.
This renewed focus on retirement savings is welcome, but you don't need to wait for a commission to act. The power to shape your financial future is in your hands and it starts with understanding whether you’re saving enough.
The retirement gap is growing
New government analysis reveals that people retiring 25 years from now could be on course to receive £800 less private pension income every year than today’s retirees. On top of this, four in ten people are currently not saving enough for the retirement they want, and the gaps are even wider among:
- The self-employed – with over 3 million not saving into a pension
- Low earners – with only 1 in 4 are saving into a pension
- Women – who are facing a private pension pot worth 48% less than their male counterparts
- Some ethnic groups – with just 1 in 4 people of Pakistani or Bangladeshi heritage saving into a pension
These figures paint a concerning picture of the future of retirees. But they also highlight the opportunity and the responsibility we all have to start addressing these gaps now – and that starts with looking at our current retirement savings.
What does a comfortable retirement look like?
To work out how much you think you may need for retirement, a good place to start is to figure out what kind of lifestyle you expect in your later years. According to Pensions UK, a single person now needs:
- £13,400 a year for a minimum standard of living
- £31,700 a year for a moderate lifestyle
- £43,900 a year for a comfortable retirement
The full state pension currently provides just under £12,000 a year. This means that for most people, private pension savings are essential to bridge the gap.
Take action today
Whether retirement is decades away or just around the corner, the most important step is to get a clear picture of your retirement savings. That’s why we’ve created the Aviva Pension Calculator.
It’s a simple, powerful tool to help you see if you’re on track for the retirement you want. It only takes a few minutes, and it could make a lifetime of difference.
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