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Steve Butler: Closing the retirement gap

Those with small-to-mid sized pension pots are being left behind, and it is Generation X that are particularly at risk saysSteve Butler managing director, Pension Potential

by Muna Abdi
June 19, 2025
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A new report from Scottish Widows reveals a deepening retirement crisis, with 15.3m people heading into retirement poverty – 1.6m more than last year.

Despite a modest rise in average projected retirement incomes (from £15.5k to £17.2k), the rising cost of living means two in five people (39 per cent) aren’t on track for even a minimum standard of living in retirement. This is no longer just a financial challenge; it’s fast becoming a social crisis.

There are concerns across all demographics, but the most immediate risk lies with Generation X. Around 10m people born between 1965 and 1981 fear they won’t have enough savings to retire comfortably.

The Get Britain Pension Ready campaign highlights that just 28 per cent of Gen X adults feel confident about their pensions and life savings — less than any other generation.

It is not hard to see why. The shift from defined benefit (DB) to defined contribution (DC) pensions has fundamentally changed the retirement landscape. Generation X has been particularly hard-hit – too young to benefit from DB schemes and too old to accumulate sufficient DC savings via auto-enrolment.

Many of those who have missed out on auto-enrolment during key earning years now face shortfalls, especially those with pension pots under £100,000 who often lack access to advice or structured retirement planning.

This lack of access to financial advice is compounding the problem. Since pension freedoms were introduced in 2014, people have been expected to make complex retirement decisions largely on their own. Yet the financial advice industry still tends to prioritise wealthier clients, leaving out those who arguably need the most help.

Research from The Lang Cat shows just 9 per cent of people pay for advice, down
from 11 per cent in 2023, with cost remaining the primary barrier. As a result, millions are making financial choices without support, often withdrawing too much, too soon, or missing opportunities to secure a more stable income. There’s an urgent need to simplify retirement planning and expand access to affordable, inclusive advice, particularly for those with smaller pensions.

This situation risks creating a “lost generation”, caught between two pension systems, with insufficient savings and a limited understanding of retirement income options like drawdown or annuities.

The traditional idea of a ‘cliff-edge’ retirement — stopping work entirely at 64 or 65 — is increasingly outdated. Most won’t have financial security to retire fully at that age. Instead, there is a shift toward more gradual retirements, with people phasing out work over several years.

At the same time, the UK is facing significant demographic changes: fewer young people are entering the workforce, while life expectancy continues to rise. Over the next 40 years, the number of over-80s in the UK is expected to double. This makes long-term financial planning more essential, yet millions of people are entering retirement with little understanding of how much they need, how to manage their savings, or prepare for unexpected costs such as later-life care.

Employers have an opportunity to help by providing more comprehensive support, going beyond auto-enrolment to offer education, tools, and tailored guidance for employees to manage their retirement planning. Employers should be looking to embed financial education into the workplace and make financial wellbeing part of the culture. At the same time they should be looking to help employees set retirement goals and offer affordable digital advice alternatives to help them realise these goals. Employers can also support more flexible retirement models, that work for older workers and improve scheme design to facilitate this. This might include introducing default drawdown pathways and accessible support services. Retirement help shouldn’t be reserved for the wealthy; it should be built into all schemes.

Retirement should be a time of stability, not struggle. Without intervention, inequality in retirement outcomes will widen, and those with the least will suffer most. However, this situation can be changed and emloyer action can help build a more inclusive and sustainable system. The clock is ticking — let’s work together to ensure another generation isn’t left behind.

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