The UK is less than two decades away from a "crisis point" when it comes to retirement income, new analysis has found.
Phoenix Insights research showed nearly three in five defined contribution pension savers will enter retirement with savings below expectations or below an adequate level in the early 2040s.
The analysis, undertaken with Frontier Economics, grouped future retirees into five categories to estimate whether they were saving enough to meet their future needs based on the PLSA’s retirement living standards.
Patrick Thomson, head of research analysis and policy at Phoenix Insights, felt the analysis painted a “bleak picture” of future retirement incomes and emphasised that these were not “tomorrow’s problem anymore”.
Between 2025 and 2060, 54 per cent of retirees with a DC pension are projected to be either undersavers or financially struggling.
According to the analysis, 2040 to 2044 represented a “critical period”, as it would see the highest number of 'financially struggling' or 'undersavers' reaching retirement.
While 59 per cent of all new DC savers retiring during this period would fall into these two categories of concern, equivalent to 2.67mn people.
According to Phoenix Insights, this group were predominantly born in the 1970s, female, working full-time and earning below £80k and expecting to retire between the ages of 66 and 70.
Thomson said: “We are already reaching the stage where the majority of people with a defined contribution pension will enter retirement with either less than they expect, or less than they need in terms of a minimum living standard. This situation is set to worsen over time and peak in the next 20 years.
He said there was an urgent need to address undersaving and policy interventions should include increasing minimum enrolment contribution rates
“And this should go hand-in-hand with policies to make work more sustainable and accessible for the over-60s, so people can continue to earn and save later in life,” added Thomson.
alina.khan@ft.com
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