Insight: Alltrust’s James Floyd highlights why personal savings must shoulder more of retirement burden

As pressure mounts on the sustainability of the State Pension, advisers must help clients confront a growing adequacy gap. In the following analysis, James Floyd, Alltrust, highlights why, with longer life expectancy and shifting workforce dynamics, personal savings, particularly for the self-employed, are becoming critical to securing a realistic standard of living in retirement for clients.

The State Pension is no longer sufficient on its own

The State Pension has long stood as the bedrock of retirement security. Yet, as policymakers review the State Pension age and adequacy in the face of rising fiscal pressures, it is glaringly clear the State Pension alone will not be sufficient for most workers, particularly the self-employed.

The government’s review is an opportunity to bring fresh attention to a subject that will define the financial wellbeing of millions. But conversations must go beyond headline debates about age thresholds and entitlement formulas. The far deeper issue is adequacy. How much income retirees will have to live on, and how best to structure saving systems that support the modern, flexible workforce?

Demographic pressures are reshaping the system

In the UK, life expectancy has increased over the past four decades, and a large proportion of the population is living well into their 80s and 90s. Whether that has plateaued or not is irrelevant.

Compounding this, the ratio of working-age people to pensioners continues to shrink. Since the 1970s, the ratio of workers to retirees has shrunk by around 30 per cent. Today there are two workers to every retiree. Unless policies change, the burden on public finances will grow heavier, especially given the mounting healthcare and social care costs.

Fiscal sustainability is under strain

Against this backdrop, the State Pension is becoming an increasingly expensive promise. Annual uprating under the “triple lock” has served to protect retirees’ purchasing power, but it also locks the government into significant expenditure increases. With public debt already elevated, there is strong fiscal incentive to reconsider how sustainable this system is over the long term.

Much of the debate has focused on the State Pension age and whether it should rise more quickly and if so, how that is done fairly across socio-economic groups. But age is only half of the story. The other half is adequacy and how far the combination of State Pension with private savings stretches to cover a retiree’s basic needs, notwithstanding lifestyle aspirations of later life.

The adequacy gap is widening

The current full State Pension is just over £10,000 per year. For most households, this will not be enough to meet even modest retirement expectations. Research from the Pensions and Lifetime Savings Association suggests that a single person needs around £23,000 a year for a “moderate” standard of living in retirement. With the best will in the world, the state pension will not plug that gap.

This adequacy gap underscores why personal saving is crucial. Automatic enrolment has helped to boost participation among employed workers, but contribution levels remain far below what is necessary for most to achieve adequacy. For the five million self-employed, the picture is even starker. With no automatic mechanism and incomes that often fluctuate, saving is inconsistent at best.

Only one in five self-employed workers are saving into a pension, which poses a significant long-term risk, as inadequate retirement income translates into greater reliance on means-tested benefits.

The self-employed face structural barriers

The reasons range from irregular earnings to a lack of employer contributions, and a system designed primarily around traditional employment contracts. But these challenges are not insurmountable. With the right mix of flexible solutions and tailored incentives, self-employed savers can be brought back into the fold.

Pension provision must also adapt to the realities of modern work. For self-employed clients, this means creating vehicles that allow for variable contributions, simple digital interfaces, and the ability to pause or scale up payments depending on cashflow. Just as importantly, it means fostering a culture of realistic saving and acknowledging that small, ad-hoc contributions are rarely sufficient to close the adequacy gap.

Contribution levels must rise to meet reality

While automatic enrolment has brought millions of pounds into the system, the statutory minimum contribution of 8% of qualifying earnings is unlikely to deliver adequacy for the vast majority. Contribution rates of 12–15% of gross income are needed to build a retirement pot that can meaningfully supplement the State Pension.

Yet the cost of living pressures make increased contributions hard. Every year of delay compounds the challenge. Policymakers, providers, and advisers must work together to communicate this message honestly and constructively. The goal should not be to scare savers, but to empower them with clarity and flexibility.

Reform must focus on adequacy, not just access

Extending automatic enrolment to younger workers and lower earnings bands is a logical step to support adequacy. Finding ways to integrate self-employed saving into tax or accounting systems, perhaps through opt-out defaults linked to self-assessment would help. Above all, the government review should keep adequacy firmly at the centre, ensuring that reforms are judged not just on fiscal sustainability but on the lived reality of retirement incomes.

Advisers have a critical role to play

For advisers and providers, the challenge is to help clients understand the gap, make saving manageable, and advocate for reforms that reflect the workforce of today. For savers, the message is simple. Do not wait for the State Pension to provide what it cannot.

Adequacy requires honesty about what is realistic, innovation to make saving easier, and collective commitment to building a system that supports everyone, especially the self-employed.