Millions of people in the UK are at risk of reaching retirement significantly ‘under-pensioned’, a report has warned.
The research by now:pensions and the Pensions Policy Institute (PPI) has concluded that almost 9 million people in the UK remain significantly under-pensioned compared to the broader population.
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Under-pensioned groups will have as little from a private pension as £3,650 to £6,750 a year, it found. Even with the addition of their state pension, this will leave many of them vulnerable to financial insecurity in retirement, it argued.
Under-pensioned groups most at risk from retirement poverty included carers, people from ethnic minority backgrounds, people with disabilities, women, divorced women, single mothers, self-employed people, and multiple jobholders.
Since 2012, auto-enrolment has transformed the way UK workers save for retirement and has brought more than 11 million additional people into a workplace pension scheme, the report highlighted.
Nevertheless, many people in under-pensioned groups do not meet the eligibility criteria for auto-enrolment and so miss out on the opportunity to save for their retirement.
While some progress has been made, such as raising the eligibility for auto-enrolment, the issue of people retiring under-pensioned challenge has been far from resolved. Consequently, under-pensioned groups are forced to rely more heavily on the state pension, the report argued.
Furthermore, many of these groups are also traditionally less likely to have a full 35 years of national insurance contributions to reach the maximum state pension (for 2025/26 £230.25 per week), so leaving them doubly vulnerable.
Separately, an analysis in The Times newspaper has highlighted that, while auto-enrolment has meant more people than ever are now saving into a workplace pension, it has also led to a sharp decline in employer contributions.
Auto-enrolment has led to £28bn more being saved into pensions in 2020 than in 2012, according to the Department for Work and Pensions, it said.
Yet, over the past three years alone, company payments into staff pensions have fallen 16%, 30% if you take inflation into account, it said, citing figures from the Financial Times.
That downward trend is set to continue after this month’s rise in the employer national insurance, with many businesses simply unable to afford to be more generous than the minimum requirements, the paper warned.
And the broader concern is that the existence of auto-enrolment gives people a false sense of security that they are saving enough for old age, even though many are not.
Research by the think-tank The Institute for Fiscal Studies (IFS) last year, for example, suggested that 30% to 40% of private sector employees (5-7 million people) saving into DC pension schemes are on course for incomes that fall short of what they are likely to need in retirement.
Drilling down into the now:pensions and PPI report, the third since 2020, while there have been some improvements in pension saving adequacy, under-pensioned groups still experience a significant pension savings gap, it concluded.
People from ethnic minority backgrounds and carers had seen an increase in employment rates and, consequently, pension savings since the 2022 report.
However, despite the rise, these groups are still below the population average with 62% to 80% of total pension saving compared to the UK average, it found.
Of the under-pensioned groups, people with disabilities had the lowest pension income at just 43% of the UK average, which meant they had a private pension income of £3,650 compared with the population average of £8,500.
Women’s eligibility for auto-enrolment has increased substantially since the inaugural report in 2020, rising from 77% in 2020 to 85% in 2025. Despite this progress, women are retiring with just 67% of the UK average and single mothers with just 54% of the UK average.
Now:pensions is therefore proposing five key policy reforms to help close this pensions gap:
- Remove the £10,000 auto-enrolment earnings trigger
- Scrap the lower earnings limit on pension contributions
- Introduce a family carer’s top-up
- Ensure pension savings are considered in divorce settlements
- Take greater action on childcare availability and costs.
Joanne Segars, now:pensions chair of trustees, said: “Without further policy action, millions will continue to struggle to achieve a secure retirement.
“That’s why we’re suggesting key reforms, including removing the £10,000 auto enrolment earnings trigger, scrapping the lower earnings limit on pension contributions, and introducing a family carer’s top-up.
“These measures would help ensure that everyone, regardless of their working patterns or circumstances, has a fairer opportunity to build a financially secure future,” Segars added.
John Adams, senior policy analyst at the PPI and author of the report, said: “The rate of employment in the general population has fallen slightly since the previous report, and under pensioned groups such as carers, single mothers and divorced women are particularly affected.
“Changes to automatic enrolment criteria could make huge strides in pension saving, such as allowing the income from multiple jobs combined to count toward the earnings trigger or removing the earnings trigger entirely.”
Drilling down into the report, the third since 2020, while there have been some improvements in pension saving adequacy, under-pensioned groups still experience a significant pension savings gap, it concluded.
People from ethnic minority backgrounds and carers had seen an increase in employment rates and, consequently, pension savings since the 2022 report.
However, despite the rise, these groups are still below the population average with 62% to 80% of total pension saving compared to the UK average, it found.
Of the under-pensioned groups, people with disabilities had the lowest pension income at just 43% of the UK average, which meant they had a private pension income of £3,650 compared with the population average of £8,500.
Women’s eligibility for auto-enrolment has increased substantially since the inaugural report in 2020, rising from 77% in 2020 to 85% in 2025. Despite this progress, women are retiring with just 67% of the UK average and single mothers with just 54% of the UK average.
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