A stark warning has been issued by the Pensions Commission as an estimated 15 million people across the UK are currently under-saving for their retirement.
The body has urgently called for a fresh “national settlement” to address the growing crisis in pension provision.
In its interim report on the state of retirement saving, the commission highlighted that significant groups face a “severe cliff-edge” when they stop working.
Women, low and middle-income earners, and the self-employed are identified as particularly at risk of financial insecurity in later life.
Without decisive action, the number of individuals inadequately preparing for retirement could escalate to 19 million, the commission warns.
This widespread under-saving also risks millions more becoming reliant on state support during their retirement.
Its interim report said: “The forces reshaping our society – longer retirements, slower growth, and falling home ownership – demand a renewed national settlement on pensions.”
The report continued: “The share of our population over the age of 65 is projected to reach 28% by 2075, up from 19% today.
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“The number of people aged 75 or over is projected to double between 2025 and 2075: a rise of six million.
“State pension age increases and slowing life expectancy increases have kept down the old-age dependency ratio during the past 20 years, but over the next decade it is expected to reach three pensioners for every 10 working-age adults and four for every 10 by the 2070s.”
It added: “Spending on pensioner benefits (including the state pension) is projected to grow from around 6% of GDP in 2024-25 to around 9% by the early 2070s.”
Set up by the Government in July 2025, the commission aims to address savings challenges that have been building for decades.
Many people do not have salary-based pensions to rely on in retirement, as these have become less common, and instead bear the risk of how much money they will end up with, based on factors such as contributions and the performance of funds.
Some groups of people are also left out of automatic enrolment into workplace pensions, such as those earning below the £10,000 earnings “trigger” in a job and people who are self-employed.
The Commission said just 4% (one in 25) of wholly self-employed workers are saving for retirement.
The report said: “Given there is no automatic enrolment for the approximately four million self-employed workers in the UK, the inertia-based pension-saving system does not provide for many who need it most.”
It added: “Although the share of women with private pension wealth has grown significantly, median uncrystallised private pension wealth in people’s late 50s was £156,000 for men in 2020 to 2022 and £81,000 for women (48% less).
“Pension participation gaps are also a particular worry for carers, people with disabilities and some ethnic minorities.”
The report said that working longer – and in particular reducing labour market inactivity among people in their 50s – is a necessary part of achieving adequate incomes in retirement.
It added: “But longer working lives can only be part of the answer and are easier for some people than others.”
There are also concerns about people running down their pension pots too early.
The commission said that on current trends about three in 10 private pension pots are accessed at the earliest possible opportunity.
A final report with recommendations will follow in early 2027 and the Commission said it wants to hear views from interested parties.
Pensions commissioner Baroness Jeannie Drake said that achieving a renewed national settlement on pensions “will require clarity of purpose, but it also offers a moment of opportunity; to renew a social contract that commands confidence across the country”.
She said: “The recommendations we present in our final report will address the need to secure adequate income in later life and a pension system that is fit for decades to come.”
Automatic enrolment into pensions brought millions of workers into pension saving, with nine in 10 eligible employees saving into a workplace pension.
But there are concerns that many people are still not saving enough for an adequate retirement.
The report said: “There is good reason to be concerned about the level of the legal floor for automatic enrolment contributions, which has become more of a norm than a minimum.”
Minister for pensions Torsten Bell said: “Britain has got back into the pension saving habit, but the job is only half done, with tomorrow’s pensioners still on track to be poorer than today’s.
“The Pensions Commission sets out clearly the scale of the challenge: not enough people are saving for retirement, and many of those that are aren’t saving enough.”
Dr Yvonne Braun, director of long-term savings policy at the Association of British Insurers (ABI), said: “The report makes a powerful case for a new national settlement for pensions.
“Automatic enrolment is a sturdy foundation, but must evolve to meet the scale of the challenges ahead.
“We and our members stand ready to work with the Commission to deepen saving, extend coverage and support better decisions in retirement, so that everyone can look forward to greater financial security in later life.”
Rocio Concha, director of policy and advocacy at Which?, said: “The report rightly highlights that too many working people are projected to reach later life without sufficient savings, and that women, carers, the self-employed and many ethnic minority groups continue to face structural barriers.
“It is also promising to see a strong focus on how to support people to use their pension savings throughout retirement.”
Julian Mund, chief executive of Pensions UK, said: “Pensions UK welcomes the breadth and ambition of this report, and shares the Commission’s view that we need a new national settlement on pensions.
“Evidence presented in the report clearly strengthens the case for more pension saving over longer working lives, alongside systemic change that delivers sustainable incomes – building on welcome reforms in the Pension Schemes Act.
“We look forward to working with Government to explore how that diagnosis can be turned into a practical roadmap for reform, well before the next generation fall short of the retirement incomes they expect and deserve.”
TUC general secretary Paul Nowak said: “Workers deserve a pension system that guarantees against poverty in retirement and enables them to maintain their standard of living.
“Although millions more people are now building up workplace pensions, far too many on low and middle incomes are not heading for a decent retirement – with women, black and minority ethnic and disabled workers, and those in the gig economy, at highest risk.
“The commission must now develop a bold plan to fix this, which will need to include higher employer contributions and a fair deal for those currently missing out.”
Nausicaa Delfas, chief executive of the Pensions Regulator, said: “We welcome the Pensions Commission report, and look forward to continuing to work with the commission, Government and industry to create a system which delivers what matters most: a sustainable income in retirement for everyone.”
Sir Steve Webb, a former Liberal Democrat pensions minister who is now partner at pension consultants LCP (Lane Clark & Peacock) said: “We have seen a ‘wasted decade’ when it comes to pensions policy in the UK.
“Since automatic enrolment was rolled out to employers of all sizes and at a minimum contribution rate at 8%, there has been no progress on building up pension pots more rapidly.”
He said the Pensions Commission must “grasp the nettle of higher contributions” in its final report, adding: “Unless we rapidly increase the amount going in to workplace pensions we are at risk of seeing whole generations facing deeply disappointing retirements or having to work on long beyond the point when they would want to stop.”
Caroline Abrahams, charity director at Age UK, said: “There’s a clear need to improve the way the state pension and private pension systems work together; otherwise people on low incomes are at risk of falling through the cracks and hurtling towards their retirements without the required funds, or the time to make up the shortfall.”
Independent Age chief executive Joanna Elson said: “It is clear change is needed to ensure a future where everyone in later life has a dignified and financially secure older age.”
Patrick Heath-Lay, chief executive for People’s Pension, said: “The next step will be for the Commission to bring together business, trade unions, the pension industry, and the public to develop a consensus view on further reform.”
