The retirement gap

Why UK retirees are working seven years longer than planned

More than half (54%) of UK retirees foresee themselves working beyond their preferred retirement age, extending their careers by an average of seven years, according to a new report[1]. This concerning trend highlights a significant gap between the age at which people wish to retire and the financial realities dictated by their pension savings.

The scenario is particularly alarming given that many individuals have diligently planned for retirement yet find their savings insufficient to support their desired lifestyle. The discrepancy between expectation and reality underscores the critical need for robust financial planning and a reevaluation of current pension strategies to ensure that retirees can enjoy the fruits of their labour without undue financial stress.

Ability to afford retirement

Adding to the gravity of the situation, over a quarter (27%) of those who have laid out retirement plans express scepticism about their ability to afford retirement altogether. This lack of confidence stems from various factors, including the rising cost of living and stagnating wage growth, which erodes the value of pension savings over time.

The financial insecurity future retirees face threatens their quality of life and places additional pressure on state and private pension systems. It is imperative for individuals and policymakers alike to address these challenges through comprehensive financial education, improved pension schemes and supportive public policies aimed at enhancing the financial resilience of the ageing population.

Younger generations want earlier retirement

A recent report reveals that younger individuals aspire to retire even earlier. Those aged 18-29 wish to retire at 61, although they are willing to work until 64 if necessary. This is four years shy of the age at which they can access their State Pension.

Only a third (34%) of respondents believe they are adequately preparing for retirement, and 38% are not on track to achieve even a minimum retirement lifestyle, as defined by the Pensions and Lifetime Savings Association. This figure has increased by 3% from last year, equating to an additional 1.2 million people, more than the combined working populations of Liverpool and Birmingham.

Impact of rising living costs

The projected increase in those facing inadequate retirement outcomes is primarily driven by rising living costs, such as a 15% increase in rents, compared to an average wage growth of just 6.2%[2]. Survey participants also highlighted the reliance on the State Pension, with just over half (54%) expecting it to form a significant portion of their retirement income.

Three-quarters (75%) deem the State Pension crucial for covering everyday necessities. However, 12% of respondents doubt that this level of support will be available by the time they retire.

Growing gap in retirement outcomes

The widening gap in retirement outcomes and the quality of later life between current retirees and future retirees is concerning. People are considering how their private pension pots might work in conjunction with their State Pension Entitlement to plan their retirement.
Despite this, reliance on the State Pension remains strong. While some individuals will use their private pension to gain the retirement flexibility they seek, many realise they might have to work much longer than anticipated.

Call for government action

Britain is far from achieving sufficient savings to provide future pensioners with their desired outcomes. In the meantime, it is crucial to help people maximise their existing resources. This is an opportune moment for the new government to adopt a comprehensive approach to financial resilience throughout people’s lives, particularly focusing on those predicted to have lower retirement outcomes.

Source data:
[1] The research was conducted online by YouGov on across a total 5,072 nationally representative adults aged 18+ in the UK between 21/03/2024 – 05/04/2024. Pension and Lifetime Savings Association (PLSA)’s living standards used as a measure. The PLSA defines a minimum retirement as someone living with no car, spending £50 per week on groceries and spending £20 for each birthday and Christmas present. The latest PLSA thresholds have increased from 8-34%.
[2] Index of Private Housing Rental Prices, UK: monthly estimates

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