77% of people won’t even have a moderate pension income
30th July 2026
Research from Pensions UK suggests that many people are not saving enough for retirement. In fact, a staggering 77% may not even have enough for a moderate pension income.
The rising cost of living has had a significant hand in this, simultaneously pushing up the cost of retirement and making it more challenging to save money.
Indeed, data reported by the BBC highlights that those set to draw a pension in 25 years will be £800 worse off per year than current retirees.
Saving for the future may feel harder than it used to, but there are still steps you can take to ensure that you’re saving and investing in line with your retirement goals. Keep reading to learn more.
The gap between savings and a comfortable retirement is widening
It’s easy to look at the 77% statistic and assume it’s a reflection of poor budgeting, but the causes are more complex. As it stands, the cost of retirement is not just climbing – it’s outpacing the average person’s ability to save.
At the heart of the issue is cumulative inflation, which affects almost every facet of day-to-day life.
In October 2022, the UK saw the annual rate of inflation peak at 11.1%, which the House of Commons Library reports was a 41-year high. Though it eventually fell to 2% in May 2024, the impact remains. Prices have stabilised at a higher rate than before, whilst household wages have taken longer to catch up.
This means that the cost of a “moderate” lifestyle in retirement is also increasing.
According to the latest Retirement Living Standards, a single retiree now requires £32,700 annually to maintain some degree of financial security and flexibility. For a more comfortable lifestyle, the average single retiree would need an annual income of approximately £45,500.
When you consider that the full new State Pension sits at £241.30 a week, or £12,547.60 a year as of the 2026/27 tax year, the gap between what the state could provide and what you need to be financially secure is widening.
If your pension contributions aren’t rising in line with inflation, this shortfall will only continue to grow, particularly if your aim is to lead a more comfortable retirement.
Understanding what a moderate income means could help you plan realistically
To help you plan, let’s break down what a moderate retirement looks like in practice.
For a single person, a £32,700 annual budget covers:
- Basic groceries, household bills, and essential maintenance
- A small, reliable car and eating out a few times each month
- A three-star, all-inclusive two-week holiday in the Mediterranean each year, with one long weekend break within the UK
- Up to £1,500 for clothing and footwear, as well as a moderate budget for gifts and charity.
For a comfortable retirement requiring £45,500 a year, the Retirement Living Standards say you will:
- Have more to spend on weekly groceries and eating out
- Be able to replace your car more frequently
- Take more holidays with a larger budget.
Crucially, both figures assume that your mortgage is already paid off, or that you are not paying rent. If you’re still paying housing costs in retirement, your baseline figure could change dramatically.
Furthermore, whilst you may assume your expenses will decrease when you stop working, retirement is often when leisure, travel, and healthcare increase. Planning for these variables is vital.
Read more: Eight essential tips for managing your money for retirement
You can take practical steps today to close the savings gap
If your goal is to retire above a moderate level of income and you’re unsure your finances could currently support that, there are steps you can take.
The key is to transition from passive saving to active and intentional wealth management.
Here are three practical steps you can take to start closing the gap.
- Audit your current plan
Review your existing savings, investment portfolios, and workplace pensions to help calculate your projected retirement income, factoring in the official State Pension. Knowing your baseline makes it easier to calculate how much of a shortfall you could face, if any.
- Maximise “free money” opportunities
If your employer offers pension matching, ensure you are contributing as much as you can to secure the largest contribution from them. Additionally, check if your workplace offers a salary sacrifice scheme. Opting to have your pension contributions taken straight from your gross pay could save on National Insurance and Income Tax liabilities.
- Don’t ignore small increases
You don’t need to completely overhaul your lifestyle to make a difference. Making small changes can have a lasting impact. For example, if you receive an annual pay rise or a bonus, consider diverting a fixed portion of that directly into your pension. Because of how growth compounds over time, a small increase today could be worth significantly more in 20 years.
Small actions now could help you build long-term financial security for the future
Retirement planning isn’t a one-time event. Rather, it’s a dynamic part of your life. Small, consistent actions taken today could have a significant compounding effect over the coming decades.
Take the time to assess your plan and work with a Financial Planner to ensure that everything is still on track. Your future self will thank you for the work you’ve done today.
We can help you with that.
Email us at enquiries@pen-life.co.uk or call 01904 661140 to speak with our team.
Please note
This article is for general information only and does not constitute advice. The information is aimed at individuals only.
All information is correct at the time of writing and is subject to change in the future.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.
The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
Workplace pensions are regulated by The Pensions Regulator.
Category: Pensions, Retirement
