Government highlights ‘chronic’ pension crisis: do you have enough to retire?

New data from the Department for Work and Pensions has revealed a stark reality: more than two-fifths of working-age adults in the UK — around 14.6 million people — are not saving enough for retirement.

The research found that fewer than one in four are on track to meet the Pensions UK “comfortable” retirement standard, while more than one in ten risk falling short of even the “minimum” level needed to cover basic living costs. The picture is particularly concerning for the self-employed, with over three million currently not saving into any pension at all.

Understanding the Retirement Crisis in the UK

Why the Retirement Shortfall Is Growing

Those retiring in 2050 are expected to have 8% less private pension income than today’s retirees — despite the widespread roll-out of automatic enrolment. Several factors are driving this decline:

• The steady disappearance of defined benefit (final salary) schemes.

• Low levels of saving among lower earners — only one in four private-sector workers on low incomes are contributing to a pension.

• Nearly half of lower earners may struggle to afford basic needs in retirement.

  
  

While most will achieve at least the “minimum” living standard, 13% are expected to fall short, raising serious concerns about future poverty in retirement.

The Self-Employed Pension Gap

The situation for the self-employed is especially urgent. Pension participation among this group has plummeted over the last 25 years — from 60% in 1998 (among those earning £10,000+) to just 20% today.

Many self-employed workers have assets in businesses, property, or other investments, but without dedicated retirement saving, they risk facing an income gap later in life. While the government has relaunched the Pension Commission to review the system, reforms may take years. Action is needed now.

Five Practical Steps to Boost Your Pension

1. Maximise Employer Contributions and Tax Relief

If you’re employed, ensure you’re enrolled in your workplace pension scheme. Employer contributions are essentially free money — combined with tax relief, they can significantly grow your pot over time. For example, saving £100 a month, topped up to £125 after tax relief, could grow to nearly £52,000 over 20 years (assuming 5% annual growth after charges).

2. Review Charges and Consider Consolidation

Know where your pensions are held and what fees you’re paying. If you have multiple pots from past jobs, consolidating them with one provider can:

• Lower charges

• Increase investment choice

• Make tracking your progress much easier

  
  

3. Increase Contributions — Even by a Little

Starting early and saving regularly is the most effective way to improve your retirement outlook. Even small increases today can have a big impact in the long run.

4. Think Twice Before Opting Out

Rising costs have led some to pause pension contributions. But opting out means losing your employer’s contribution — effectively turning down free money and reducing your future income.

5. Explore Lifetime ISAs (for the Self-Employed)

For self-employed workers and basic-rate taxpayers saving outside a workplace pension, a Lifetime ISA can be a valuable tool. The government adds a 25% bonus to your contributions (similar to basic-rate tax relief), and withdrawals after age 60 are completely tax-free.

The Importance of Early Planning

Planning for retirement is crucial. The earlier you start, the better prepared you will be. Many people underestimate how much they will need to live comfortably in retirement. It’s essential to have a clear understanding of your financial goals and the lifestyle you wish to maintain.

Assess Your Current Financial Situation

Before making any changes, assess your current financial situation. Take a close look at your income, expenses, and savings. This will help you determine how much you can realistically contribute to your retirement savings.

Set Clear Retirement Goals

Establish clear retirement goals. Consider factors such as when you want to retire, the lifestyle you wish to lead, and any travel or hobbies you want to pursue. Having specific goals will help you stay motivated and focused on your savings plan.

Educate Yourself About Retirement Options

Take the time to educate yourself about different retirement options. Understand the various types of pensions available, including workplace pensions, personal pensions, and government schemes. Knowledge is power when it comes to making informed decisions about your retirement.

The Bottom Line

The retirement savings gap is real, but it’s not too late to take action. Whether you’re employed or self-employed, small, consistent steps now can dramatically improve your financial security in later life.

At Pecunia Financial Planning, we help clients create tailored retirement strategies that work for their lifestyle, ambitions, and resources — ensuring they don’t just get by in retirement, but truly enjoy it.