A third of UK adults are expected to live in retirement poverty, a new report by Scottish Widows suggests, with the provider calling for higher minimum contributions and auto-enrolment for the self-employed. The report comes as the Pensions Commission is due to publish its interim report soon. 

Under projections by Scottish Widows with Frontier Economics, based on 6,000 people, about 31%, or 12.2m, are expected to live on less than Pensions UK’s minimum retirement living standard once they retire. While concerning, the figure represents an improvement on last year, when 15.3m (39%) were predicted to be poor in retirement. Last year, the government estimated that 43% of the working age population – 14.6m people – were undersaving for retirement, rising to 15.4m after housing costs.

The provider's report says the better projections are driven by falling housing and energy costs, with more people now expected to own their own home when they retire. Housing has become more affordable in two-thirds of local authorities, as since 2021, median house sales prices have increased by 5%, while average earnings have increased by 25%, according to the Office for National Statistics. 

Pete Glancy, head of pension policy at Scottish Widows, called the fall in pension poverty compared to a year ago “a step in the right direction” but said it hides a complex picture and “can easily be thrown off course by shifting external factors like increases to energy and general cost of living”.  

The government’s Pensions Commission is expected to publish its fact-finding report soon before coming up with recommendations in 2027. However, any improvements flowing from this would likely only be implemented in the 2030s and 2040s, Scottish Widows noted, meaning it will take decades until the full benefits are felt. 

To address the pensions outlook of the UK population, Scottish Widows recommends raising minimum auto-enrolment contributions to 12% from currently 8%, something that Pensions UK and the Association of British Insurers urged ministers to do four years ago. 

However, the government has ruled out increasing contributions in this parliament, indicating that investment returns need to do the heavy lifting in the foreseeable future, despite being highly unpredictable. Other auto-enrolment reforms, based on recommendations by the Auto-Enrolment Review from late 2017 – more than eight years ago – have been accepted in theory but never put into practice. 

Scottish Widows calculates that increasing default contribution rates to 12% on the first £30,000 of salary would raise projected retirement savings by £40,000 on average; for young people aged 22–29, this could give them pension pots worth about £114,000 at retirement, the provider claims. This would reduce pension poverty to 13% thanks to an average boost of £65,000, according to Scottish Widows. 

The government claims that its own reforms – including a new value for money regime and automatic consolidation of pots worth £1,000 or less, along with a slew of other reforms – will increase the pension pots of average earners by up to £29,000 by the time they retire. 

The 13% of people who would remain at risk of pension poverty under Scottish Widows’ calculation are mainly self-employed, part-time workers or unemployed people, it found. The UK’s 8.8m part-time workers are more likely to face pension poverty as, coupled with lower earnings, they may not reach the £10,000 auto-enrolment threshold from one job to make them eligible for auto-enrolment. 

Scottish Widows also wants to see an equivalent of auto-enrolment for the 4.4m self-employed, a growing group where pension savings are low – although housing wealth tends to be greater. Pensions for the self-employed were not included in the Pensions Act 2026. 

“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,” said Glancy.  

Compatibility between pensions and personal finance products should be “accelerated”, the firm also said, “to facilitate better retirement journeys”.   

“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,” Glancy added.

Policymakers and industry are taking too long to act on the issues the report points to, suggested Mark Futcher, who heads up DC pensions at consultancy Barnett Waddingham.

“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,” he said.

Futcher also wants a stronger focus on retirement options, not just building pots: “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.”

Brian Byrnes, director of personal finance at Moneybox, argued that pension outcomes is not just about contribution levels.

“Your pension is likely to be one of the most important financial assets you will ever own, yet too often the experience of managing it feels overly complex and fragmented,” he said.

Delays to the pensions dashboard mean savers can struggle to get a clear, confident picture of their retirement savings, he added. “If we want to ensure people are saving enough for retirement the focus needs to be on building financial confidence by making pensions simpler, clearer and easier to navigate – something we’re hopeful the impending Pension Commission will look to solve.”