Women, the self-employed and carers have emerged as the most disadvantaged when it comes to pension saving, according to a government study.
The pension gender gap and a lack of retirement provision for the self-employed and carers is well-known but an official government study has highlighted the real impact on people.
The study followed the lives of 17,415 babies born in England, Scotland and Wales in a single week in March 1958 – part of the post-war baby boomer generation – following them up a further 11 times, most recently at age 62 as they prepare for retirement.
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The findings highlight the factors that can influence a comfortable retirement and it comes as the government revived the Pensions Commission to look at boosting saving for people’s golden years.
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Data from Pensions UK shows the cost of a comfortable retirement is £43,900 per year, but official figures show it is difficult for many to achieve this sum.
Here is what the baby boomer study showed about pension saving.
Are baby boomers ready for retirement?
Many of this group grew up and had their careers before auto-enrolment, and some will have benefited from the rise of defined benefit (DB) schemes rather than the now dominant defined contribution (DC) products.
Half had a total expected pension income which was less than their target retirement income, the study shows. This decreased to 43% when financial wealth such as the value of other savings was included.
The study found that 78% of study members have a private pension.
One in three have a DB pension and one in two a DC pension but there are gender disparities.
More women than men have a DB pension at 37% to 33% and more men than women a DC pension at 55% to 39%.
However, on average. the value of a DB pension for men is twice the value for women at £13,900 compared with £7,500.
The value of a DC pension for men is also around three times the value for women at £90,000 to £28,500.
It is more tough when it comes to being self-employed though. The data shows that this cohort are three times more likely to not have any private pension at 29% to 10% and are almost four times less likely to have a DB pension.
How people are accessing their pension
One in four study members had fully retired by their early 60s and were more financially advantaged compared to their peers in paid work.
Three-quarters of those with a pension have already accessed or intend to access one of their private pensions before state pension age, the research shows.
This was higher for those with a DB (84%) than a DC (66%) pension.
Of those that had accessed their DB pension, 85% had taken a lump sum in addition to their pension income.
Of those that had accessed their DC pension, almost two-thirds (63%) had withdrawn a tax-free lump sum.
Twice as many had taken an adjustable income than had purchased an annuity at 33% compared with 17%, the report said.
Meanwhile, 15% had withdrawn their entire pension fund in one lump sum. This figure was higher among women than men at 19% against 13%.
Among the study members who had accessed a private pension, those who had fully retired were more socio-economically advantaged than those who remained in paid work, the research showed.
Most owned their own home outright, had a degree, weren’t divorced and had savings of £100,000 or more.
State pension awareness
The state pension may have got more generous in recent years, especially with the triple lock, but a lack of awareness and over-reliance remains.
The research showed that 80% expected to receive their state pension at age 66, suggesting 20% did not know the age when they would receive it.
Yet many are unsure of how much they will receive.
When asked to approximate the amount of state pension based on a range of values that were presented to them, 18% still reported they did not know.
Of those study members who gave an expected value, three in 10 gave a value between the average and full 2022 to 2023 state pension, 47% gave a figure below and a quarter above the full new state pension.
The report estimates that one in two study members would be mostly reliant on the state pension.
It said those who we estimated to be mostly reliant were women, those with lower education levels, divorced or single, rented their home, were self-employed, in a home-care role or not in paid work due to poor health as they had fewer options to build up personal pensions.
Patrick Thomson, head of research analysis and policy at the Standard Life Centre for the Future of Retirement, said the analysis lays bare the scale of the challenge for the Pensions Commission.
He said: “A lot of the assumptions that our current pension and retirement system are built on are designed for people like those born in 1958 – 63% are married and 61% own their home outright.
“Retirees of the future will look markedly different, with more people privately renting, needing to balance their work and home lives, and facing uncertain care costs. We need a system that works for the realities of the way we live today.
"These findings highlight how crucial it is for improvements to be made to pensions adequacy alongside increasing participation among underserved groups. This means supporting people to stay in work for longer and helping them make the most of the savings they do have, for example through initiatives such as Targeted Support. The Pensions Commission will need to confront these structural gaps if future generations are to achieve genuinely secure and sustainable retirements.”
Kelly Parsons, head of DC proposition at pension consultancy Broadstone, said the next phase of reform needs to focus on contribution adequacy and targeted engagement with groups at the greatest risk of poorer retirement outcomes.
She said: “For employers, this is also a workforce issue. Better scheme design, more inclusive contribution structures and support around life events such as parental leave can make a meaningful difference. Without coordinated action from policymakers, employers and the industry, today’s imbalance risks becoming tomorrow’s retirement inequality.”
