Millions of people across Britain are facing a “cliff edge” when they retire, due to a lack of retirement savings, a landmark report from the Pensions Commission has warned.
The Government-backed report said 15 million people are not currently saving enough for retirement, particularly low and middle-earners, the self-employed and women, and warned this could rise to as many as 19 million without action.
First established in 2002, the Commission was revived by the Labour Government in July 2025 to address the retirement savings challenge, amid fears a large percentage of the population is facing chronic levels of undersaving.
The Commission said delivering a sustainable framework for adequate pensions is “essential” against a backdrop of changing demographics and an ageing population. The share of population over the age of 65 is projected to reach 28% by 2075, up from 19% today, while the number of people aged 75 or over is projected to double between 2025 and 2075 – a rise of six million.
The report found low and middle earners are most at risk of failing to save adequately, with around half saving only the minimum Automatic Enrolment levels with little else to fall back on.
Concerningly, 45% of working-age adults – around 18 million people – are not saving into a pension at all, despite nearly half of them being in work.
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. The Commission warns that without action millions more people could be at risk of becoming reliant on state support in retirement.”
Automatic enrolment
The report acknowledges that while automatic enrolment has increased workplace pension saving, there remain challenges in the depth and growth of people’s private savings, with pension contribution rates varying significantly.
Furthermore, 14% of employees, around four million, are not eligible due to automatic enrolment’s age limits and £10,000 earnings trigger.
The Pensions Commission said there is “good reason to be concerned” about the level of the legal floor for automatic enrolment contributions, cautioning that it has become more of a norm than a minimum.
Where there is additional saving, the evidence suggests that this is led by employer behaviour rather than employees themselves and is more likely to benefit higher earners.
The report also paints a stark picture for the ‘gig economy’ with just 4% – one in 25 – of wholly self-employed workers saving for retirement, with this number even lower among younger self-employed people.
To improve adequacy, particularly for low to moderate earners, the Commission said it will consider how the eligibility criteria, income thresholds and minimum contribution rates for automatic enrolment will need to be adjusted in the future.
Jon Greer, head of retirement policy at Quilter, commented: “Automatic enrolment has brought millions into pension saving, but it has also exposed a deeper structural weakness. Too many people are contributing at minimum levels that are unlikely to deliver adequate retirement outcomes, creating a dangerous gap between perception and reality. People feel like they are doing the right thing, yet many remain on course for a retirement that falls short of expectations.
“This is compounded by clear blind spots in the system. The self-employed remain largely excluded, and there is still a fundamental lack of engagement with pension saving more broadly.
“Behaviourally, inertia works well when people are nudged into saving, but it works just as effectively against them when it comes to increasing contributions or making active decisions.”
Greer added: “Structural change is needed, particularly for the self-employed, where the traditional model of locking money away until later life continues to act as a deterrent. More flexible savings solutions, alongside mechanisms that replicate the success of automatic enrolment in this group, will be essential if participation and adequacy are to improve together.”
David Brooks, head of policy at Broadstone, commented: “The report suggests that there is significantly more work to be done across the pensions industry to provide innovative solutions for millions of people – especially lower earners and the self-employed – to bring them into the system and begin to support their pension saving journey.
“While increasing minimum automatic enrolment contribution rates will inevitably form part of the debate, this is unlikely to be a panacea given the current budgetary pressures facing many households. Encouragingly, there is already a broad package of reforms that have just been passed into law which aim to deliver better value for money for pension savers as well as improving awareness, engagement and outcomes.”
Pete Glancy, head of pension policy at Scottish Widows, also urged the Government to address the issue of self-employed workers.
“There’s an urgent and pressing need to extend an auto-enrolment equivalent to the 96% of self-employed workers not currently saving into a pension. Pensions as we know them won’t work for the self-employed – we need flexible products that sit alongside other savings and investments with a default ‘opt-out’ mechanism.”
Gender inequality
The report also laid bare inequalities between men and women. 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 2020/22 and £81,000 for women.
The Commission said lower income, part-time or insecure work and time out of work for sickness and caring means that women accumulate far less private pension wealth.
The UK has the second highest gender pensions gap in the OECD, despite above-average basic pensions entitlements, with a difference of over 35% between the average pension income of men and women.
Andrew Tully, technical director at Nucleus, said: “The gender gap in retirement confidence is a clear warning sign. Women are saving less, have fewer financial products, and are less confident about their long-term prospects.
“We need more targeted communication, flexibility in saving options, and a concerted effort to make financial planning more inclusive so women aren’t left behind.”
Accessing pensions
Another key development in recent times is how pensions are accessed, with behavioural changes following the introduction of the Pension Freedoms creating growing “adequacy concerns”, the Commission said.
Pension savings no longer necessarily deliver pension incomes and high levels of full cash withdrawals, particularly from smaller pots, widespread early access of tax-free cash and high rates of wealth withdrawn from pension pots suggests that many savers risk running down their pension wealth too quickly.
Around three in 10 private pension pots are accessed at the earliest possible opportunity with half of all pots taken out in full. Nearly half of these are spent on large expenses like a car, holiday or renovations.
The Commission said maximising tax-free cash lump sums has become the default decision, now perceived as a ‘normal course of action’ or a ‘no brainer.’ However, research found that many admitted they had not considered the decision in depth and had failed to consider what the cash accessed could have been worth had they kept it invested. While they did not regret taking their tax-free cash, many felt anxious about the future.
Brooks commented: “There are concerning findings around how quickly people are rushing to access their pension and the proportion who are fully encashing their pot, leaving them vulnerable to running out of money later on in retirement.”
Over the next year the Commission will hear a wide range of views before presenting its final report and recommendations in early 2027. It adds that there is much for public policy to do to shape the future of pensions and change must happen in the right way, but any recommendations for change will need to be implemented gradually.
For Tully, it is crucial that there is a long-term stable policy framework that removes pensions from short-term political cycles and stops using pensions as a political lever.
He explained: “We’re seeing a deep erosion of trust in the retirement system. Constant tinkering with pension rules makes long-term planning feel pointless. The Commission is a step in the right direction, but confidence won’t return until people believe the rules will remain stable in the long-term.
“We need clear communication and a joined-up approach across pensions, housing and savings to give people the certainty they need to plan properly for the future.”
Kate Smith, head of pensions at Aegon, added: “We welcome the Pensions Commission’s initial report. Working lives and employment have changed dramatically since the first Pension Commission recommendations 20 years ago, and with the introduction of auto-enrolment in 2012. Policies need to evolve to reflect people’s often disjointed working lives.
“We agree that a renewed national settlement on pensions is needed, with a pension reform roadmap to deliver this. The Pensions Commission presents an opportunity to make a difference to people’s later lives, and we should work together to seize it.”
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