The number of UK adults at risk of facing pension poverty in later life dropped from 39 per cent or 15.3 million people in 2025 to 31 per cent or 12.2 million.
This is according to Scottish Widows’ National Retirement Forecast, which found that the improvement was driven partly by increased non-pension savings as well as more people expecting to own their own home in retirement.
But Scottish Widows warned retirement outcomes remain a challenge as energy prices increase and cost-of-living pressures continue.
The provider said increasing auto-enrolment contributions from 8 per cent to 12 per cent could reduce pension poverty from 32 per cent to 13 per cent among defined contribution savers currently contributing below 12 per cent.
It is also calling for auto-enrolment style pension saving solutions for the self-employed, alongside better integration between pensions, savings and housing wealth.
The findings come as the government’s independent Pension Commission reviews options to improve long-term retirement outcomes.
Scottish Widows head of pension policy Pete Glancy says: “This report paints a complex picture. While the fall in pension poverty compared to a year ago is a step in the right direction, this shift in retirement fortunes is complex and the current state of the nation’s savings is still polarised. The factors we can control, like how much we save or how much we expect to receive in retirement, may improve, but can easily be thrown off course by shifting external factors like increases to energy and general cost of living.”
“The way people are working continues to evolve, but our retirement system still lags behind. This year we have modelled the impact of some policy changes only on the youngest workers as this gives us the best indication of the long-term benefit applying not only to them, but all future generations yet to join the workforce.
“We must also ensure that choosing flexibility today – through self-employment or part-time work – doesn’t come at the expense of tomorrow. Extending auto-enrolment to the self-employed, as is one of our recommendations to the Pension Commission, is critical and should be implemented at pace to close this gap in retirement saving.
“Most people are unlikely to have enough in their pension pots alone to fund their desired retirement, so pensions can no longer be viewed in isolation. Considering pensions alongside other savings, investments and housing wealth – and advancing the Government’s Open Finance agenda – will be key to improving retirement outcomes for all.”
Barnett Waddingham head of DC pensions Mark Futcher says: “The most frustrating part of these findings is that none of this is new. We’ve spent years identifying the cracks in the system, yet too many people are still falling through them. And while it’s positive to see some progress, at some point we have to stop admiring the problems and actually fix them.
“But this also only tells half the story. While most of the focus rightly remains on helping people build pension pots during their working lives, the options available when they actually retire are still relatively blunt – cash, annuity or drawdown.
“For most people, retirement isn’t just a moment in time, it’s a journey, and yet too many people are effectively being handed a map with only three routes on it. Fixing auto-enrolment is a great start, but if we want to stop the pensions ‘timebomb’ from blowing up in our faces, we need fixes at both ends of the system.”