Newly released data from Scottish Widows’ 19th annual Retirement Report has sparked concerns about the financial prospects of future UK retirees.
According to the report’s new National Retirement Forecast (NRF), a staggering 35% of Brits may face financial hardship in retirement, unable to afford basic necessities such as food and heating.
The NRF uses the Pension and Lifetime Savings Association (PLSA)’s ‘Retirement Living Standards’ to provide an in-depth analysis of the potential quality of life for individuals once they cease working.
The forecast encompasses a broad range of societal demographics including varying ages, ethnicities, genders, employment statuses, as well as underrepresented groups such as disabled individuals and the LGBTQ+ community.
Notably, the forecast exposes a stark disparity among future retirees. While 36% are projected to enjoy a comfortable retirement, an equal proportion are expected to struggle financially.
Of particular concern are certain societal groups, such as renters and young people, who face an increased likelihood of financial hardship in retirement. The report shows 43% of people predicted to struggle in retirement will still be paying rent, which in some regions equates to 60-70% of a retiree’s income. In London, this figure jumps to an alarming 130%.
Moreover, 41% of people currently in their twenties are predicted to endure a difficult retirement, with an average retirement income of just £10,000 amongst this group. In contrast, 43% of millennials appear to be on track for a comfortable retirement, demonstrating the benefits of robust saving habits and automatic enrolment schemes.
Pete Glancy, head of policy at Scottish Widows, called for a threefold solution involving government reforms, businesses addressing workplace inequalities, and the financial services industry improving communication to foster effective retirement saving habits across diverse demographic groups.
Further exacerbating this bleak outlook is the significant disparity facing disabled individuals, over half of whom (51%) are predicted to face poverty in retirement. On average, disabled individuals can expect to live on an income that is just 61% of that anticipated for non-disabled people in retirement.
“The NRF has highlighted the importance of addressing the inequalities facing disabled people who have additional costs of living that make it harder to achieve a good lifestyle, build savings and plan for the future,” said Glancy. “Employers must act now to resolve disparities in pay, progression and to close the pensions gap, while the government must advocate for more transparency from businesses to help disabled people avoid the bleak reality of a retirement suffered in poverty.”
