Recommendations
In previous reports we identified the important role which housing tenure plays in retirement outcomes, noting that the average rent in social housing is £500 per month less than the average private rent. Social housing here in the UK is one of the primary investments which provide a guaranteed income for life to our customers in retirement, and this allows us to create a virtuous circle of lower costs during retirement combined with higher incomes.
In this year’s report we have been able to quantify the impact of rising and falling energy costs, where a £500 per annum rise in energy costs could have an impact which is equivalent to auto enrolment contributions falling from 8% to 7%. It therefore makes sense for Government and industry to work together to determine whether a similar virtuous circle could be created here.
We have projected that increasing the statutory level of saving through auto enrolment from 8% to 12%, the level of retirement poverty could be reduced from 31% to just 13% with the remainder facing poverty being those groups who are excluded from auto enrolment. Increasing the statutory level of saving to 12% only on the first £50k of earnings gets the country most of the way there, reducing the poverty rate to 14% – BUT this could introduce complexity into what is currently a very simple savings framework.
By increasing the statutory level of saving through AE from 8% to 12%, the level of retirement poverty could be reduced from 31% to just 13%.”
The largest group excluded from auto enrolment are Britain’s 4.5m self-employed. An equivalent of auto enrolment is required for the self-employed, although we believe the self-employed will require more flexibility on how much to save and when, and also more flexibility around when money can be accessed. The self employed don’t have payroll systems, and so an alternative technology platform needs to be found. (See also our research with Nest Insight from last year on closing the retirement savings gap for self-employed people).
Any roadmap towards higher contribution and an ecosystem for the self employed would likely have to be staggered over a fairly long period of time. Once fully implemented it will then be another 30 to 40 years before the full effect is felt across the retired population. In the meantime therefore, a large proportion of those working in the private sector won’t have enough in their private pension pots to keep them out of poverty in retirement. Many retirees will however have other savings and investments and also equity in their home, and when all of this is considered collectively many more people will be able to map out an adequate retirement journey.
We will need to avoid initiatives which risk separating pensions from other elements of people’s personal finances. To this end, more could be done to bring together the advice regime applying to housing equity and the regime which covers pensions and investments. The Government’s Open Finance agenda is a route through which all of this could be brought together more easily, as long as it is delivered in a commercial sustainable way.
Previous editions
The Scottish Widows Retirement Report survey:
- Unless otherwise stated, all figures in this report are from the responses to our annual Retirement Report survey and are relevant to the United Kingdom. The survey included general questions on pensions and retirement planning and was carried out online by YouGov Plc: across a total of 6,224 adults aged 18+, weighted to be representative of the UK population, and including a boost of 1,000 adults aged 18+ to better understand the retirement prospects of minority ethnic groups, also weighted to be representative of the UK minority ethnic population aged 18+.
- Fieldwork was carried out between 16 February 2026 and 24 February 2026.
- We estimate people’s retirement income as the sum of (1) an annuity purchased using their DC pension pot, other Long-Term savings and inheritance at retirement, (2) any DB pension income and (3) the State Pension. We present retirement income in real terms, so after accounting for inflation.
- Real income growth: We assume people will have a real wage growth of 2% each year.
- Retirement age: We assume everyone will retire at 65.
- Defined contribution (DC) pensions and other long-term savings: We assume people’s DC private pensions and other Long-Term savings pot would grow until retirement based on the following assumptions:
- Current stock: We asked people for the current total value of all DC pensions and other Long-Term savings. If people didn’t know the total value of their DC pensions or other Long-Term savings, we conservatively assumed they were zero.
- Current retirement savings rate: We asked people how much they are saving each month into their DC pensions and other Long-Term savings, and also how much their employer was contributing. If people didn’t know how much they or their employer were contributing to their DC pension, we assumed they were contributing in line with auto-enrolment (with thresholds £6,240 & £50,270, and savings rate 8%). If people didn’t know how much they were saving into other Long-Term savings, we assumed they were not saving anything for these.
- Savings rate growth: We assume people’s saving rates will change over time between age bands in line with the average profile of savings rate growth we see across people of different ages in our sample.
- Real rate of return: We assume a real rate of return on investments of 2% each year.
- Inheritance: We asked people how much inheritance they expect to use for retirement.
- Annuity rate: We assume that upon retirement people will use all of their DC pension pot, other Long-Term savings and inheritance to purchase an annuity. We assume an annuity rate of 3.5%. We note that this is conservative based on current annuity rates available on the market, but it is consistent with our previous Retirement Reports.
- Defined benefit (DB) pensions: We generously assume anyone who is currently contributing to a DB pension has been doing so since the age of 22 and will continue to do so until the age of 65 (given this generous assumption, we assume none of them additionally receive any DC pension income). We assume they will accumulate an accrual for each of the 43 years they contribute into the DB pension, with different accrual rates for people working in the private or public sector. We then apply the accumulated accrual to their projected salary at 65 to estimate their retirement income from their DB pension.
- Public sector accrual rate assumption: 1/43. This means we assume anyone who is currently contributing into a DB pension and works in the public sector will have a DB pension income equal to 100% of their projected salary at 65.
- Private sector actual rate assumption: 1/60. This means we assume anyone who is currently contributing into a DB pension and works in the public sector will have a DB pension income equal to 72% of their projected salary at 65.
- State Pension: we generously assume everyone will receive the full State Pension at £12,547 per year.
- We estimate people’s retirement income left to pay for their retirement lifestyle by subtracting estimated housing costs.
- Housing costs: We asked people whether they expected to pay rent or mortgage in retirement, and which area they expect to live in. For people who expect to pay rent or mortgage in retirement, we assume their housing costs are equal to the median rental cost in the region they expect to live in, sourced from the Valuation Office Agency, the Scottish Government and the ONS.
- We then compare retirement income after housing to the costs of the Pensions UK’s Retirement Lifestyle Standards to estimate the proportion of people on track for each lifestyle.
- Pensions UK Retirement Living Standard: We use the annual costs Pensions UK estimated for. These vary between singles and couples, and also people living in and outside London. Because we represent future retirement incomes in real terms, we do not need to apply inflation to 2024 housing or lifestyle costs.
- Couple’s adjustment: For people married or in a civil partnership, we asked what proportion of their couple’s retirement income they expect to provide. We scaled up the retirement income of these people assuming they are correct in the proportion of their couple’s retirement costs they will pay, before we subtract housing costs and compared to the costs of the Pensions UK benchmarks. This assumption may be generous if people underestimate how much of their couple’s retirement income they will provide. If people do not state their contribution share, we assume a share of 50% per spouse.
- Excluding people:
- We excluded people who didn’t know which type of pension they were contributing to. While this could bias our results, we checked that the breakdown of people who did know what pension they were currently contributing to was not substantially different to the national average: 20% currently contributing to DB and 50% to no pension in our sample which excludes people who don’t know, versus 23% and 43% respectively from ONS.
- We also excluded people who did not know or say how much they were saving for retirement income, or who gave implausible answers. To account for this, we (1) calculated our headline results (i.e. the proportion of people on track to meet different retirement lifestyles) separately for people currently contributing to DB, DC and no private pensions, and then (2) estimated weighted average headline results by weighting the results for each pension type by the number of people currently contributing to each pension type in our nationally representative sample.
- Limitations of our analysis.
- Our results are sensitive to the assumptions we use and the accuracy of responses to survey. The purpose of our analysis is to show at a high level the broad proportions of people who are or are not prepared sufficiently for retirement.
