At least 15 million people across the UK are not saving enough for retirement, according to a new interim report from the Pensions Commission, which warns of a growing financial “cliff edge” facing future retirees.
The government-backed body cautions that the number of under-savers could rise to 19 million without intervention, raising concerns about long-term financial security and increasing pressure on public finances.
The Commission highlights that around 45% of working-age adults, equivalent to ~18 million people, are not contributing to a pension at all, despite nearly half of them being in employment. This indicates a widespread gap between participation in the labour market and retirement planning.
Low and middle earners are identified as particularly vulnerable. Around half of those who are saving are doing so only at the minimum level required under automatic enrolment rules, leaving them with limited financial resilience in later life.
Under automatic enrolment, employers must enrol eligible employees into a workplace pension and contribute a minimum of 3% of qualifying earnings, while workers contribute 5%, making a total minimum contribution of 8%. However, the Commission suggests that this level is insufficient for many people to achieve a comfortable retirement.
The report also draws attention to the self-employed, among whom pension saving rates are extremely low. Just 4% of wholly self-employed workers are contributing to a pension with participation even lower among younger self-employed individuals.
Another key concern is how pension savings are being accessed. The Commission found that around 30% of private pension pots are drawn down at the earliest opportunity, with approximately half of those accessed being withdrawn in full. Nearly half of this money is spent on large purchases such as cars, holidays, or home improvements, rather than being preserved for long-term income.
The findings also underscore a significant gender gap in retirement savings. Women approaching retirement have, on average, about half the private pension wealth of men. Median pension savings stand at around £81,000 for women compared to £156,000 for men.
The Commission, led by Jeannie Drake and including experts from finance and public policy, warns that without reform, many future retirees could be worse off than today’s pensioners. It stresses that the pensions system must evolve to reflect modern working patterns, including more flexible and self-employed careers.
Minister for Pensions, Torsten Bell MP, said: “The Pensions Commission sets out clearly the scale of the challenge: not enough people are saving for retirement, and many of those that are aren’t saving enough.
The Pensions Commission will continue its work and is expected to publish a final report with policy recommendations in early 2027.
The report can be found here:
https://www.gov.uk/government/news/britain-is-undersaving-for-retirement-warns-pensions-commission
