Retirement outlook worsens since 2023 with 15.3m people risking retirement poverty 

The report outlines major concerns for Gen Z, low to middle-income earners and self-employed workers.

Related topics:  Later Life,  Retirement
Rozi Jones | Editor, Financial Reporter
8th May 2025
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Rising living costs have worsened the nation's retirement outlook since 2023, according to the latest report from Scottish Widows. Two fifths (39%) of people in the UK aren’t on track for a minimum lifestyle in retirement, worsening from 35% in 2023. 

Although pension saving levels have increased in the last 12 months, with projected retirement income rising to £17.2k from £15.5k, they have failed to keep pace with the cost of living.

The Pension and Lifetime Savings Association (PLSA) estimates that a minimum retirement lifestyle would cost a single person outside London £14.8k per year in today’s money – excluding housing costs - leaving retirees with minimal funds after basic living costs.

While 69% of people feel financially independent, a quarter do not. And, over two in five (44%) don’t believe they will ever be able to achieve this. 

Across the population, as many as half (50%) know they aren’t saving enough for retirement, with certain key groups facing even worse outcomes. 

Generation Z

Most young adults will be saving into a Defined Contribution pension through their employer, as well as relying on personal savings and the state pension. However, competing financial goals makes retirement savings a challenge. A quarter (25%) of people in their 20s prioritise saving for emergency expenses, while 13% aren’t able to save at all. Instead, their main savings goals are emergency funds, house deposits and holidays. 

Under the National Retirement Forecast (NRF) projections, 42% of young people in their 20s are at risk of poverty in retirement and 23% will only be able to afford a minimum retirement lifestyle. 

Squeezed low to middle earners

Auto-enrolment has resulted in millions of people saving for the future, but the default contribution rate leaves minimum savers vulnerable. Squeezed low to middle earners, those on an income between £20,000 and £35,000 and in their 30s, are mostly likely (46%) to contribute the minimum 8%. 

This group faces a 60% income drop in retirement on average, with 70% seeing their income halved. Amid financial pressures, 60% of people in their 30s know they aren't saving enough, and 30% don’t save.

Self-employed

The UK’s 4.39 million self-employed workers are still excluded from automatic enrolment, leaving many with poor retirement outcomes. Over half (51%) are at risk of not being able to cover their basic needs in retirement and just 25% are on track for a minimum retirement lifestyle. Two in five (39%) self-employed workers believe they aren’t saving enough for retirement, with 23% not saving anything at all. 

Pete Glancy, head of pensions policy at Scottish Widows, said: “Our research couldn't be more timely, spelling out just how crucial targeted measures are in preventing millions from living in retirement poverty in the coming years. The second phase of the Government’s Pensions Review must be broad enough to take a holistic view on people’s financial journey through life considering wide-ranging financial goals. There are three key areas that must be addressed urgently: auto-enrolment, self-employed contribution rates and housing, considering both home ownership and affordable housing.

“For now, the challenge is helping people make the most of what they have. It is essential to ensure people feel financially empowered to make informed decisions and take proactive steps for their future – with a strong sense of financial independence playing a key role.”

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