More than a third of UK households are on track for a moderate retirement income, but renters, single parents and the self-employed are falling behind, according to the latest HL Savings and Resilience Barometer. While higher earners, homeowners and married couples without children are in a better financial position, those facing higher costs and volatile incomes are struggling to put money aside for later life.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Saving for retirement is a long-term game, but there are some groups facing more challenges than others. Data from the latest HL Savings and Resilience Barometer shows that the self-employed, renters and single parents are particularly at risk as they battle higher costs, volatile working conditions and housing expenses.”
Renters face significant financial strain, with many paying high rents that leave little disposable income. “Renters struggle because they are paying higher rent which leaves them with less money left over at the end of the month to get onto the housing ladder. On average, they end the month with just £62,” said Morrissey. “Being able to own your own home is a major plus point when it comes to boosting retirement resilience, as it reduces your later life costs and gives you a valuable asset.”
Single parents face even greater challenges, often covering household costs on a single wage. “They have to cover all their living costs with one wage as well as paying out more for essentials like food,” she said. “However, when you also add children into the equation then you can see why many single parent finances are stretched to breaking point even before they start saving into pensions. On average they have just £50 left at the end of the month.”
The self-employed face a different set of barriers, including the lack of employer pension contributions and concerns over tying up money in a scheme they cannot access until later life. Morrissey highlighted the potential benefits of the Lifetime ISA (LISA), which offers a 25% government bonus on contributions up to £4,000 per year. “The 25% bonus on contributions up to £4,000 per year has the same effect as basic rate tax relief in a pension, with the added benefit that any income taken is tax free,” she said.
However, she warned that the 25% exit penalty on early withdrawals is discouraging savers and should be reduced. “The charge on early access is a problem though, as it not only removes the effect of the bonus but also a chunk of people’s hard-earned savings,” she said. “Reducing this charge to 20% would remove this effect and give savers the comfort of knowing they won’t lose any of their own money.”
Morrissey also called for an expansion of LISA eligibility, which currently limits new accounts to those aged between 18 and 39. “Allowing people to open and contribute to a LISA up until the age of 55 would enable more people to build up a decent retirement income – notably those who become self-employed later in life.”
She added: “We estimate that these changes could be a huge help to the 1.2 million households that have a self-employed earner paying the basic rate of tax.”
