1.2m more people ‘falling short of minimum retirement prospects than a year ago’

About a million more people than a year ago are at risk of falling short of having a minimum lifestyle standard in retirement, a report has found.

Nearly two-fifths (38%) of people are estimated not to be on track for even a minimum lifestyle, according to the research from Scottish Widows , up from 35% in last year’s annual report.

The increase equates to an additional 1.2 million people.

Scottish Widows used the retirement living standards produced by the Pensions and Lifetime Savings Association (PLSA) to make the finding.

The minimum standards under its definition are having enough income in retirement to cover basic needs with some left over for fun.

For example, this includes being able to afford a one-week UK holiday and having £50 to spend a week on groceries or £95 as a couple. The minimum standard assumes that someone would not have a car.

It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for

The increase in those projected to fall short of the minimum standards has been driven by living-costs rises, such as surging rents, the report said.

It added: “More people will be renting or carrying mortgage repayments on through retirement in the future.”

The research, which used a YouGov survey of more than 5,000 people across the UK in March and April, found that more than half (54%) of UK retirees expect to work longer than they would like, on average by seven years.

The typical age that people said they would like retire at is 62.

Scottish Widows’ 20th annual retirement report also found that younger generations would like to retire even earlier.

People aged 18 to 29 want to retire at 61 typically, and would be prepared to work until 64 on average if necessary – although this would still leave a gap before they reach state pension age.

Across all age groups, more than a quarter (27%) of those who have made retirement plans do not feel that they would ever be able to afford to do it.

Scottish Widows has suggested a roadmap to increase minimum contributions into pensions from 8% to 12%, “with a strong steer that those who can afford 15% should do so”.

Pete Glancy, head of pensions policy at Scottish Widows, said: “The growing gap in retirement outcomes and people’s quality of later life, between those who are currently retired and those who will retire in the future, is of great concern.

“It is likely to be a long time before Britain has been saving enough to give future pensioners the outcomes they hope for. In the meantime, helping people to make the very most of what they have is going to be critical.”

He added: “At present only the wealthiest tend to rely on professional support from a qualified financial adviser.

“As an industry, we need to find a way to give people better support in making good financial decisions at a price more savers are willing and able to pay.”