Millions of UK workers heading for retirement shortfalls

A growing share of the workforce is underprepared, under-informed and under-saving for retirement.

And for many, the problem is so acute that they fear never being able to retire at all.

Of course, money worries can’t be left at home, and can fuel stress, low engagement and absenteeism in the workplace.

So for HR leaders, understanding the scale and scope of this issue is crucial for supporting a resilient workforce and building financial wellbeing.

According to Scottish Widows, over 15 million UK adults are now at risk of falling into poverty in retirement. 

That’s nearly four in ten (39%) who aren’t on track to afford even a minimum standard of living.

And this number is rising.

People in their 20s are especially vulnerable, with estimates suggesting that 42% could retire in poverty.

That’s largely because they have short-term financial needs to deal with, such as saving for a deposit on a house.

Low to middle earners in the 30s, earning between £20,000 and £35,000 are also at risk, with 70% expected to lose half their income in retirement. 

Despite this, nearly one in three people in this group aren’t saving at all, while almost two-thirds acknowledge they aren’t saving enough.

The situation is also particularly bleak for Gen X - those in their 40s and 50s - as many aren’t confident they’ll have enough to enjoy a comfortable lifestyle when they retire.

According to Get Britain Pension Ready, just 28% of Gen X people are on track for a comfortable retirement.

That compares with:

• 50 per cent of Gen Z
• 47 per cent of millennials
• 37 per cent of baby boomers

Many Gen X people will be juggling competing priorities - from childcare and mortgages to supporting ageing parents.

But at the same time, some will be conscious that their window to save for retirement is closing.

Nearly one in five (17%) Gen X people worry that they’ll never be able to fully retire, not because they want to keep working, but because they simply won’t have the money to do so.

A study by St. James’s Place shows that 60% of UK adults don’t believe they’ll reach the £500,000 needed for a moderate standard of retirement.

In fact:

• almost half (48%) have under £50,000 saved
• 61% have under £100,000
• only 28% feel confident they’ll be able to retire with enough to live moderately

Worryingly, those closest to retirement are the least confident. 

Just 15% of workers aged 45 to 54, and only 17% of those aged 65 to 74, believe they’ll reach the £500,000 mark.

Another issue fuelling this retirement crisis is that many people don’t actually know how much they need to save.

In fact, there’s a dangerous mismatch between what many think they’ll need and what they actually need to retire.

Figures showed that:

• 23% believe they’ll need less than £50,000
• 44% think they’ll need £200,000 or less
• only 46% realise they’ll need upwards of £500,000 for a moderate lifestyle

This gap in knowledge can have two important consequences.

Some will feel a sense of false confidence, while others will feel incredibly anxious about the future.

For many people, retirement can feel a long way off, so planning for it might not be a priority right now.

And for others, it might seem too complex to think about, or even too depressing to address head-on.

Whatever the reason, a huge number of people aren’t actively prioritising saving for retirement.

Figures from St. James’s Place show that:

• one in three (32%) UK adults have no idea what pension they currently hold
• nearly one in five (19%) have never reviewed their pension
• almost a quarter (23%) say saving for retirement isn’t a priority at all

These studies all point to the same problem.

Millions of people in the UK are facing a serious retirement shortfall - and that will be causing serious anxiety for some.

So it’s important for HR leaders not to just look at this as a financial issue.

Instead, it’s an opportunity to lead on financial wellbeing, and in turn, boost employee engagement, resilience and retention.

By helping your workforce engage with their financial future, perhaps through better education, tools and perks, you can build long-term security both for your team and your business.