Millions of people are heading towards retirement incomes of around £18,000 a year, well below accepted adequacy levels, PensionBee warns in its response to an All-Party Parliamentary Group inquiry.
According to the Pensions UK Retirement Living Standard, a single person needs close to £44,000 a year for a “comfortable” retirement and around £32,000 for a “moderate” standard of living. But PensionBee data shows that the average pension pot at retirement is around £88,000, which, combined with the state pension, is likely to generate an annual income of around £18,000.
The firm says uncertainty around life expectancy, inflation and market volatility continues to impact effective retirement planning.
PensionBee also notes other pressures on retirement income, such as frozen tax thresholds and more people working beyond state pension age out of necessity. It says that ongoing instability in pension tax policy risks further damaging outcomes.
The firm called for stronger default retirement income options, greater tax policy stability and earlier, more accessible guidance, alongside a rethink of how retirement income is delivered, including more automated and flexible drawdown solutions.
PensionBee chief business officer UK Lisa Picardo says: “Too many people are approaching retirement with expectations that simply don’t match the reality of their savings. The gap between what people need for a reasonable life in retirement, and what their pension is likely to deliver them as an income, is growing – yet individuals are still expected to navigate complex decisions at a time when their confidence is often lowest.
“Set against an economic backdrop characterised by volatility and uncertainty, and faced with the pressure of rising costs of living,, the need for stability and clarity in pension policy has never been more important. Without clearer information, earlier guidance and support that is easy to access and understand, many savers will continue to make short-term focused, or overly cautious, decisions that may limit their income in later life.”
