Marvin OnumonuMillions in midlife are not on track for a decent retirement, according to new research from Legal & General (L&G).
The study found that around nine million people aged 25 to 54 were behind on their pension savings, with 5 million of those aged 40 to 54.
People working part-time, renters and those who had taken a career break were most at risk.
The research, carried out by Public First for L&G, was based on more than 8,000 people.
It used a new measure called Minimum, Replacement, Rent (MRR) to check if people’s future income would meet a minimum standard of living, replace enough of their current wages, and cover housing costs for renters.
People aged 40 to 54 faced the biggest challenge.
Many missed out on the benefits of older, more generous pension schemes and were too old to get the full advantage of auto-enrolment.
Nearly one in five (19%) started saving after age 35, giving them less time to build up their pension.
The average pension pot for a 47-year-old was £27,000.
For renters it was just £4,000, and for part-time workers £6,000.
A fifth (21%) expected to have a poor standard of living when they stopped working, and felt they would be less secure than today’s pensioners, their parents, or their peers.
Cost of living pressures, caring duties, insecure jobs and health issues all made it harder to save.
The research also found that 41% of midlifers in work but not saving into a pension said they could not afford it.
Others gave reasons such as not being told to save, not knowing what to do, or not having time to look into it.
L&G said the new Targeted Support service would help more midlifers make the most of the next few decades.
Additionally, L&G noted wider issues such as culture, education, housing and jobs also had an impact on saving.
Its new Decades Ahead programme will bring together research, policy engagement and practical solutions to find out where targeted and bigger interventions can make the most difference.
The programme will work with policymakers and industry to inform the new pensions commission, support employers to bridge the gap between general information and advice, and work with non-profits to help build long-term financial wellbeing.
António Simões, group CEO at L&G, said: “Pensions are a cornerstone of the UK economy.
“They help drive growth and, more importantly, they shape people’s futures for the decades ahead. But a comfortable retirement doesn’t happen by accident.
“It’s built over a lifetime of saving. Just as pension savings compound over time, so too can inequality and missed opportunities.”
Simões added: “Our new research highlights the scale of the challenge, particularly for today’s midlifers.
“Millions are not on track for the retirement income they will need but, as importantly, our analysis shows it’s not too late to make a meaningful difference for those people.
“There are many reasons for pensions inadequacy, both structural and attitudinal.”
He said: “That’s why Legal & General (L&G) is taking a new approach, bringing together industry, policymakers, civil society, employers and savers, to recognise a nuanced picture and drive collective action.
“We’re committed to stepping up to this complex challenge, through the support we offer our customers, and by helping shape a system that delivers better long-term outcomes for everyone.”
Andrew Harrop, director at Public First, said: “Public First and L&G are working together to deepen our understanding of the pension and saving challenges facing people in work today.
“This research introduces a new, more comprehensive, measure of retirement income adequacy by assessing whether people can secure a minimum acceptable income and replace an appropriate share of their pre-retirement earnings, after housing costs.
“Only around half of people in the core decades of working life are on track to meet this new standard.”
He said: “We are particularly concerned about people in midlife, many of whom are reaching 50 with very little saved and with deep pessimism about their financial future.
“However, the findings also show there are real opportunities to improve outcomes.
“Employers, policymakers and civil society all have an opportunity to address the current shortfall.
“There may still be a long way to go to secure retirement security for all but the challenge is far from insurmountable.”
