National Retirement Forecast 2026: It is Poverty for 12.2m Brits

Takeaway:
The proportion of UK adults projected to fall below a minimum retirement lifestyle has improved from 39% to 31%, but 12.2 million people are still on track for pension poverty. The improvement is driven more by lower cost assumptions than by stronger savings behaviour.

1. Headline Numbers

• 31% of UK adults (≈ 12.2m people) are set for less than minimum retirement living standards.
• Down from 39% (15.3m) in 2025 — an 8‑percentage‑point improvement.
• Median projected household retirement income increased slightly from £25.7k → £25.9k.

But:
Much of the improvement is due to lower energy costs reducing the cost of a “minimum” lifestyle, not because people are saving more.

2. Why the Numbers Improved

A. Lower cost of the “minimum” lifestyle

• Around half of the improvement comes from updated Retirement Living Standards (RLS).
• Energy costs fell temporarily, reducing the income needed for a minimum lifestyle.
• Energy prices are rising again — meaning this improvement may reverse next year.

B. Slightly stronger position among non‑pension savers

Those without pensions (a key at‑risk group) now show:

• Slightly higher pay
• Slightly higher non‑pension savings
• Higher expected home ownership in retirement

This reduces projected housing costs and nudges some above the minimum threshold.

3. Auto‑Enrolment & Contribution Rates

Scottish Widows modelled the impact of raising contributions:

Increasing AE contributions from 8% → 12%

• Would boost average retirement savings by £40,000.
• For ages 22–29, projected pots rise to ~£114,000.
• Pension poverty among DC savers would fall from 32% → 13%.

Policy implication:
Extending auto‑enrolment and increasing minimum contributions remain the single biggest levers for improving retirement outcomes.

4. Inequalities in Retirement Outcomes

A. Ethnicity

Broad averages hide significant variation:

Better outcomes

• Indian and Pakistani groups
  • Higher pension participation (66% vs 57% overall)
  • Lower expected retirement renting (18% vs 23%)

Worse outcomes

• Black and Mixed‑race groups
  • More likely to fall below minimum lifestyle
  • Lower pension participation and lower home ownership expectations

B. Region

Pension poverty ranges 28–34% across most of the UK.

Best outcomes

• South East: 25% pension poverty; ~40% projected to have a comfortable retirement.

Most polarised

• London:
  • 38% pension poverty
  • 34% comfortable
  • High incomes but high housing costs create a split outcome.

C. Employment Type

Full‑time employees

• Fewer than 1 in 5 face pension poverty.

Part‑time & self‑employed

• More than 1 in 3 face less‑than‑minimum outcomes.
• Many are excluded from auto‑enrolment due to earnings thresholds or self‑employment status.

D. Vulnerability & Health

• 44% of vulnerable adults face pension poverty.
• 50% of those with health conditions affecting daily life fall below minimum (vs 27% of others).
• Healthy life expectancy is at its lowest recorded level, increasing expected retirement costs (care, support, adaptations).

5. What This Means for Retirement Planning

A. Pensions alone won’t be enough

Scottish Widows emphasises the need to consider:

• Pensions
• Other savings
• Investments
• Housing wealth

B. Auto‑enrolment reform is essential

Key levers:

• Lowering the AE earnings threshold
• Including the first £1 of earnings
• Extending AE to younger workers
• Increasing minimum contributions

C. Energy costs are a major driver

Volatile energy prices materially change:

• RLS thresholds
• Required retirement income
• Pension adequacy projections

D. Home ownership remains a major determinant

Renting in retirement significantly increases the risk of falling below minimum living standards.

6. In Summary

31% of UK adults — around 12.2 million people — are on track for a retirement below the minimum living standard.

While this is an improvement on last year, the change is driven largely by lower energy costs rather than stronger savings behaviour.
Auto‑enrolment reform, higher contribution rates, and better support for part‑time, self‑employed, and vulnerable workers remain critical to improving long‑term outcomes.

Drivers of Pension Poverty: 2025 vs 2026 — Comparison Table