The newly-launched National Retirement Forecast (NRF) from Scottish Widows has provided forensic analysis of the challenges faced by different demographics in the UK – showing some startling differences in expectations depending upon where we live, our ethnicity, gender and age, as well as whether we have disabilities or own our home.

The report establishes the clearest picture ever captured of the UK’s future retirement landscape, using the Pension and Lifetime Savings Association (PLSA)’s “Retirement Living Standards” levels, to calculate the quality of lifestyle that people are set to achieve when they stop working.

The broadbrush stats are that 35% of Brits may struggle to afford food and heating in retirement, while 36% are heading for a comfortable retirement. But the report bores down to granular level to compare the retirement lifestyles within reach for different ages, ethnicities, genders and employment statuses, as well as zeroing in on underrepresented groups such as disabled people and the LGBTQ+ community.

In forecasting savers’ anticipated lifestyles, the NRF recognises that factors other than pensions play a role in the income people will rely on in retirement and also accounts for housing costs. Many societal groups – such as renters and young people – are disproportionately facing hardship, while others such as millennials are saving well for retirement:

• Almost half (43%) of the people predicted to struggle in retirement expect to be still paying rent.
• Rental costs amount to 60-70% of renters’ retirement income in several parts of the country, but this figure to 130% in London.
• Almost half (41%) of people currently in their 20s are heading for hardship in retirement, with an average retirement income of £10K among this group.
• 43% of Millennials are on track for a comfortable lifestyle, reflecting strong savings behaviours and the benefits of automatic enrolment.
• On average, women will receive a third less income in retirement than men (£19K vs £12K).

Where we work matters too

In addition, the NRF highlights how employment patterns can create challenges for different demographics.

Women, ethnic minorities and disabled people are disproportionately represented in lower paid and part-time jobs in which it is more difficult to accrue a sufficient pension pot.

Meanwhile, self-employed people generally lack formal incentives to save adequately compared to full-time employees. Bringing this to life, the average full-time employee is on track to receive £27k a year in pension income – nearly three times what the average part-time employee and the average self-employed person are on track for (£11k and £10k respectively).

Living expenses remain a real concern for a large majority (75%) of Brits, which could be affecting retirement preparation. Against the backdrop of ongoing economic uncertainty, a worrying minority (21%) is also cutting back on essentials – up from 16.5% in 2022.

Pete Glancy, Head of Policy at Scottish Widows, said: “One in three (35%) of us are facing the harsh reality of a retirement where we will struggle to make ends meet. Last year’s Retirement Report highlighted the impacts of the pandemic, cost of living and wage stagnation. This year the pressure seems to have intensified due to increasing inflation and interest rates continuing to climb.

“The solution needs to be threefold. We are calling on the Government to help end retirement poverty by implementing long-term reforms, such as ensuring that automatic enrolment can support those on lower incomes. Secondly, businesses need to do more to address the inequalities faced in the workplace by disadvantaged groups like women, disabled people and the LGBTQ+ community.

“Finally, the financial services industry must get better at effectively communicating with diverse groups to build trust and ensure that people of all incomes and demographics understand how to save effectively for retirement.”

The disability pension gap

While the NRF reveals a challenging retirement landscape nationwide, it also indicates the particularly concerning outlook for disabled people, more than half (51%) of whom are set to face poverty in retirement.

The average disabled person will need to manage on £11,000 per year in retirement – just 61% of the income predicted for non-disabled people. According to disability equality charity Scope, disabled households need £975 more per month to secure the same standard of living as non-disabled households, meaning that the already considerable retirement income gap highlighted by the NRF may even be a conservative estimate.

Louise Rubin, Head of Policy and Campaigns at Scope, said: “Life costs a lot more when you’re disabled, and planning for retirement is a luxury many cannot afford. Many disabled people are denied the opportunity to get into, stay in, and progress in work, making it much harder to build up a pension.

“We need to break the link between poverty and disability and make sure disabled people have an equal standard of living. Tackling the disability employment gap and driving down the extra cost of disability must be made political priorities.”

Pete Glancy, Head of Policy at Scottish Widows, added: “The NRF has highlighted the importance of addressing the inequalities facing disabled people who have additional costs of living that make it harder to achieve a good lifestyle, build savings and plan for the future.

Employers must act now to resolve disparities in pay, progression and to close the pensions gap, while the government must advocate for more transparency from businesses to help disabled people avoid the bleak reality of a retirement suffered in poverty.”

Find out your retirement future

Need to know how much YOU need to save to provide you with a financially secure retirement – whether you own your home or rent? Or how much you will be able to spend each year based on your current savings targets? You can find out the answers in minutes using the online retirement financial planner RetireEasy.co.uk.

You can even run different scenarios to see at a glance how the sums change if your circumstances change, or if you decide to save (or spend!) more or less than you had originally planned.