Are you one of 15 million people at risk of retirement poverty?
Two-fifths of people in the UK aren’t on track for a minimum lifestyle in retirement, new data shows. Are there steps you can take to boost your pension?


More than 15 million people in the UK are at risk of retirement poverty – 1.6 million more than in 2023. This equates to almost two-fifths of the adult population.
A higher cost of living is largely to blame. Pension saving levels have actually increased over the past year, with projected retirement income rising from £15,500 to £17,200, according to Scottish Widows’ latest retirement report.
Pete Glancy, head of pensions policy at Scottish Widows, argues there are “three key areas” for the government to address “urgently” – auto-enrolment, self-employed contribution rates, and housing.
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In the meantime, he says the challenge is “helping people make the most of what they have”.
Steps savers can take to boost their pension include starting early, increasing contributions, and tracking down lost pension pots. Younger savers can also consider adjusting the risk profile of their investments, where appropriate, to take advantage of a longer investment horizon.
“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,” Glancy said.
Which groups are at greater risk of pension shortfall?
Gen Z, low to middle-income earners and self-employed workers are some of the groups at greatest risk.
Younger savers tend to focus on other life goals, with a quarter prioritising their emergency savings pot over their pension. The main financial goals among Gen Z savers also included house deposits and holidays, suggesting pensions could be at risk of being neglected.
Forty-two percent of young people in their 20s are at risk of poverty in retirement, while 23% will only be able to afford a minimum standard of living. Thirteen percent say they are not able to save anything at all, either for retirement or other savings goals.
Meanwhile, low to middle-earners (those in their 30s with an annual income of £20,000 to £35,000) are struggling to contribute anything more than the default 8% when it comes to pension contributions.
This group faces a 60% income drop when they retire, according to Scottish Widows, with 70% seeing their income halved.
Self-employed workers arguably face an even tougher savings environment on account of being excluded from auto-enrolment rules.
Over half are at risk of not being able to cover their basic needs in retirement, Scottish Widows found, while only 25% are on track for a minimum standard of living.
Twenty-three percent of self-employed people are not saving anything at all.
“Year in, year out, the inadequacy of pension contributions is a concern we see – and without clear, decisive action for change, the ticking timebomb of the UK’s pension system could soon blow up in our faces,” said Paul Leandro, partner at pension consultancy Barnett Waddingham.
“To top it off, the situation is even more dire for the self-employed – millions of whom are lacking the safety net that auto-enrolment into a workplace scheme provides employed workers.
“The new pensions minister’s commitment to addressing retirement adequacy is a welcome message, but the devil will now be in the detail. We cannot afford another year of delays or policy inertia – or a Dickensian future is on the cards where people are forced to work well into old age just to make ends meet.”
How much do you need for a comfortable retirement?
The cost of a comfortable retirement has soared in recent years thanks to high inflation.
The latest figures from the Pensions and Lifetime Savings Association (PLSA) show that a single person needs a retirement income of £43,100 per year, while a couple needs £59,000.
A moderate retirement costs £31,300 for single people and £43,100 for couples, while a basic retirement costs £14,400 and £22,400 respectively.
These figures do not include housing costs, so those who are still paying off a mortgage or renting in retirement could find themselves paying significantly more.
A basic retirement does not include the cost of running a car, nor does it allow for foreign travel.
Savers might be surprised at how much they need in their pension pot to fund this.
Figures we plugged into MoneyHelper’s annuity comparison tool showed a 65-year-old would need a pension pot of around £545,000, if they wanted to purchase an annuity that paid out enough each year to fund a comfortable retirement (i.e. just over £43,000 per year).
The amount will vary depending on your health and the sort of annuity product you want to buy, as well as market annuity rates at the point of purchase.
The quote we generated assumes the 65-year-old is in good health, and wants to purchase a single-life level annuity.
Of course, in addition to private pension income and annuities, savers should not overlook the important role the state pension may play in their retirement plan.
The full new state pension currently pays £230.25 per week, or just under £12,000 per year. Those who don’t have a full National Insurance record will receive less.
The state pension is uprated each year in line with inflation, earnings growth, or by 2.5% – whichever is highest. This “triple lock” is an expensive policy for the government to maintain, and while Labour has promised to keep it until the end of this parliament, the policy might not be around forever.
Even with the triple lock, single pensioners who receive the full new state pension do not have enough to fund a basic standard of living, unless they supplement it with additional income from a private pension.
A basic retirement costs £14,400 per year for a single person, according to PLSA figures, while the full new state pension currently pays out just under £12,000.
How to boost your pension
There are some steps savers can take to boost their pension and improve their chances of an adequate retirement. One of the most effective steps is upping your pension contributions, if you can.
Salary sacrifice can be a tax-efficient way of doing this. Salary sacrifice is an arrangement where you reduce your cash pay in return for a non-cash benefit like pension contributions. As your salary is reduced before income tax and National Insurance is taken off, you will also pay less tax.
Calculations from investment platform Interactive Investor show that a middle earner on £35,000 could save £140 in tax by increasing pension contributions by 2%, leading to a total tax saving of £8,458 over 40 years.
This would result in additional pension savings of £22,933, according to the investment platform, assuming a 5% annual return and 2% wage growth.
“For those who can afford it, it’s a smart, tax-efficient way to build long-term financial security,” said Myron Jobson, senior personal finance analyst at Interactive Investor.
Naturally, those who boost their pension contributions by more than this could see even better results (although make sure to read up on the annual pension allowance).
As a rule of thumb, Scottish Widows suggests saving 12-15% of your salary into your pension to help achieve a comfortable retirement. This includes your personal contributions, plus your employer’s contributions and tax relief. Starting from a young age will allow you to benefit from the power of compound returns.
Another tip for younger savers is to weigh up the pros and cons of the different risk profiles available to you within the default funds offered by your pension provider. Younger savers who are in a low or medium-risk default fund could consider moving into their pension provider’s higher-risk default fund, where appropriate, to take advantage of a longer investment horizon.
While higher-risk default funds will generally have a larger allocation to volatile assets like global equities, these assets also have a higher return potential than assets like bonds. Over an investment horizon of several decades, the effects of this volatility are typically smoothed out. Then, as you move closer to retirement, your pension provider will typically de-risk your portfolio by moving you into less volatile investments.
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Katie has a background in investment writing and is interested in everything to do with personal finance, politics, and investing. She enjoys translating complex topics into easy-to-understand stories to help people make the most of their money.
Katie believes investing shouldn’t be complicated, and that demystifying it can help normal people improve their lives.
Before joining the MoneyWeek team, Katie worked as an investment writer at Invesco, a global asset management firm. She joined the company as a graduate in 2019. While there, she wrote about the global economy, bond markets, alternative investments and UK equities.
Katie loves writing and studied English at the University of Cambridge. Outside of work, she enjoys going to the theatre, reading novels, travelling and trying new restaurants with friends.
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