Under the latest National Retirement Forecast (NRF) projections*, a third of UK adults face poverty in retirement, according to Scottish Widows’ latest annual Retirement Report.
The NRF projects retirement outcomes based on savings, behaviours and income sources, comparing expected income to potential living and housing costs in retirement.
The report shows a marked reduction in the number of people on track for a less than minimum retirement lifestyle – 31% (12.2 million people) – down from 39% (15.3 million) in 2025. However, the current state of the nation’s savings is still precarious.
Better retirement outcomes driven by falling housing and energy costs
The positive change has been driven by two key factors. Firstly, those not saving in the traditional way through a pension have increased their level of savings elsewhere, and more of those also now expect to own their own home when they retire.
Secondly, falling energy costs in the short-term have led to more people meeting the minimum lifestyle standard as set out by Pensions UK’s Retirement Living Standards**. However, with recent global events pushing energy costs back on an upward trajectory, this positive progress could soon be undone.
Pete Glancy, head of pension policy at Scottish Widows, said: “This report paints a complex picture. While the fall in pension poverty compared to a year ago is a step in the right direction, this shift in retirement fortunes is complex and the current state of the nation’s savings is still polarised. The factors we can control, like how much we save or how much we expect to receive in retirement, may improve, but can easily be thrown off course by shifting external factors like increases to energy and general cost of living.”
The Pension Commission – a once in a generation moment
The UK Government’s recently established Pensions Commission is expected to recommend changes which government and industry should implement during the 30s and 40s – to put the nation in good shape for retirement through the second half of the century.
Even if the recommendations of the Pensions Commission are adopted by the Government and implemented, it will be many decades until the full benefits are felt. In the meantime, most of the population won’t have enough in their pension pots to facilitate their retirement, and it will be necessary for them to consider other savings, investments and housing equity in totality.
Scottish Widows recommends the following policy measures to improve retirement saving prospects in the UK:
1. Increase the statutory level of saving through auto-enrolment from 8% to 12%
2. Create an equivalent of auto-enrolment for the self-employed sector
3. Accelerated compatibility between pensions and personal financial products (savings, investments, housing equity) to facilitate better retirement journeys
Increasing the auto-enrolment contribution rate to 12%
Automatic enrolment is an important tool to help more people have at least a basic lifestyle in retirement, especially for those on low to middle incomes.
Scottish Widows calculates that increasing default contribution (DC) rates would have a sizable impact on the pension pots of those currently saving, especially for young people. Raising total contribution rates from 8% to 12% on the first £30k of salary would increase projected retirement savings by £40k on average. For those aged 22–29, the impact is far greater, increasing pots to around £114k at retirement.
Increasing default contribution rates has the largest impact on the size of pension pots for younger cohort and those who will join the workforce in the future
Average increase in pension pot***
Scottish Widows’ analysis also shows that among defined contribution (DC) members saving below 12%, should the statutory level of contribution through auto-enrolment increase from 8% to 12% across total salaries – it would drastically reduce pension poverty from 32% to 13% – an increase of £65k. If the increase were applied only to the first £50k of salary the average pot would increase by £55k, with pensioner poverty also being reduced dramatically to 14%.
The remaining 13% at risk of pension poverty are mainly self-employed, part-time or unemployed people.
Extending auto-enrolment could significantly improve the nation’s retirement outcomes; this is especially important as the UK’s 4.39 million self-employed and many of the 8.79 million part-time workers**** – currently excluded from auto-enrolment – are more likely to face pension poverty, with around a third in each group experiencing a below-minimum retirement lifestyle.
Pete added: “The way people are working continues to evolve, but our retirement system still lags behind. This year we have modelled the impact of some policy changes only on the youngest workers as this gives us the best indication of the long-term benefit applying not only to them, but all future generations yet to join the workforce.
“We must also ensure that choosing flexibility today – through self-employment or part-time work – doesn’t come at the expense of tomorrow. Extending auto-enrolment to the self-employed, as is one of our recommendations to the Pension Commission, is critical and should be implemented at pace to close this gap in retirement saving.
“Most people are unlikely to have enough in their pension pots alone to fund their desired retirement, so pensions
can no longer be viewed in isolation. Considering pensions alongside other savings, investments and housing wealth – and advancing the Government’s Open Finance agenda – will be key to improving retirement outcomes for all.”
Mark Futcher, Head of DC Pensions at Barnett Waddingham, part of Howden, said:
“The most frustrating part of these findings is that none of this is new. We’ve spent years identifying the cracks in the system, yet too many people are still falling through them. And while it’s positive to see some progress, at some point we have to stop admiring the problems and actually fix them.
“But this also only tells half the story. While most of the focus rightly remains on helping people build pension pots during their working lives, the options available when they actually retire are still relatively blunt – cash, annuity or drawdown.
“For most people, retirement isn’t just a moment in time, it’s a journey, and yet too many people are effectively being handed a map with only three routes on it. Fixing auto-enrolment is a great start, but if we want to stop the pensions ‘timebomb’ from blowing up in our faces, we need fixes at both ends of the system.”
Angeline Ong, Senior Technical Analyst at IG:
“While recent figures from Scottish Widows suggest an 8% decline in the number of people facing pension poverty, the underlying picture remains deeply concerning. Around one in three people across the UK are still at risk. Many people simply save less than they think they need for retirement, not through neglect, but because inflation and regulation steadily erode the value of their pension pot.
“One encouraging trend reflected in the Scottish Widows data is that many people who are not building wealth through traditional workplace pensions are finding other ways to save and invest. However, the growing instability in the Middle East risks keeping inflation higher for longer – and history shows it’s very hard to get the inflation genie back in the bottle once it’s out.
“From 2028, the minimum pension access age will rise to 57, creating what is effectively a double hit for savers. Not only are people living longer, meaning retirement savings need to stretch further, but access to pension funds is also being pushed further out of reach. In practical terms, many people may now need their retirement income to last 25 to 30 years – or even longer.
“Building a stocks and shares ISA alongside a pension can play a critical role in closing that gap before pension access begins. Workplace pensions remain highly valuable, particularly where employer contributions are matched, but ISAs offer greater flexibility and tax-efficient access to capital when needed. The most effective approach is usually a balanced strategy that takes into account earnings, retirement ambitions, and future tax exposure.”
Vivan Shridharani, Co-Founder & CCO at Raindrop, said:
“There are some key steps to maximise retirement savings that everyone should be prioritising. Starting to save as early in your career as possible and increasing your pension contributions can have a major impact – but this is easier said than done as living costs remain high and millions of people face below-inflation wage growth.
“One of the most effective approaches pension savers can take is to track down their lost pots – research from the Pensions Policy Institute (PPI) estimates that over £31 billion is sitting in lost pension pots. Lost pots are a major issue for everyone but especially younger people – our previous research shows that less than a fifth (17%) of people aged 18-34 know exactly where all their pension pots are and 19% also admit that they have no idea how much they have saved for retirement.
“Tracking down lost pots can be a hugely time-consuming and often frustrating task but emerging tech has the answer. Since launch, Raindrop’s technology has helped UK savers find more than £1.6 billion from 172,000 lost pension pots through working with some of the UK’s largest pension providers – approaches such as this are vital in providing thousands of people with greater control over their retirement savings and preventing a future pension crisis.”
Suzanna Kemal, Head of HR at Reward Gateway | Edenred, comments:
“Affordability pressures and rising costs can often mean working people are focusing on the day-to-day rather than the years ahead – unknowingly putting themselves at risk of pension poverty.
“According to our research, pensions schemes are the most common workplace benefit, with over three-fourths (77%) of British employers offering them.* But there is not enough being done to encourage uptake amongst the workforce, auto-enrolling employees and ensuring they are aware of the incredible benefits of investing in their future. With financial wellbeing becoming more important than ever, organisations are in a unique position to empower and support their employees, and that starts with the workplace pension.”
Brian Byrnes, Director of Personal Finance at Moneybox:
“Improving pension outcomes is not just about contribution levels; it’s also about confidence and engagement.
“Your pension is likely to be one of the most important financial assets you will ever own, yet too often the experience of managing it feels overly complex and fragmented. Even relatively straightforward tasks like transferring old pensions can feel more like a tedious form-filling exercise than the slick app-based experiences we’ve all come to expect. On top of this, the continued delays to the pensions dashboard make it harder for savers to get a clear, confident picture of their retirement savings.
“If we want to ensure people are saving enough for retirement the focus needs to be on building financial confidence by making pensions simpler, clearer and easier to navigate – something we’re hopeful the impending Pension Commission will look to solve.”
The research was conducted online by YouGov across a total 6,224 adults aged 18+, weighted to be representative of the UK population, and including a boost of 1,000 adults aged 18+ to better understand the retirement prospects of minority ethnic groups, also weighted to be representative of the UK minority ethnic population aged 18+. Fieldwork was carried out between 16 February 2026 and 24 February 2026.
*The National Retirement Forecast (NRF), first run in our 2023 Retirement Report with Frontier Economics, projects retirement outcomes for those aged 22 to 65 based on savings, behaviours and income sources, comparing expected income to potential living and housing costs in retirement. The NRF is based on data from approximately 6,000 people.
**Pensions UK’s: Retirement Living Standards (RLS). These standards outline the income thresholds for different retirement lifestyles (“minimum”, “moderate” and “comfortable”) showing how much can be afforded for singles and couples, living inside and outside of London, in retirement across different categories of spending such as clothing, transportation, holidays, and home maintenance.
***The chart shows the increase in projected pension pot at retirement by age band for DC members contributing at or below new proposed AE levels:
The orange bars project AE increases to 12% on the first £30k of salaries
The green bars project AE increases to 12% on the first £50k of salaries
The burgundy bars project AE increases to 12% across total salaries
****https://researchbriefings.files.parliament.uk/documents/CBP-9366/CBP-9366.pdf
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