Industry benchmarks such as the Pensions UK Retirement Living Standards suggest a ‘comfortable’ retirement requires an income of nearly £44,000 a year for a single person, with almost £32,000 needed for a ‘moderate’ standard of living.
However, PensionBee data shows the average pension pot at retirement age is closer to £88,000 which, when combined with the State Pension, is likely to deliver an estimated annual income nearer to the £18,000 mark. This significant gap highlights a stark mismatch between expectations and outcomes for many future retirees.
PensionBee’s response highlights that uncertainty around life expectancy, inflation and market volatility continues to undermine people’s ability to plan effectively for retirement. While pensions are the primary source of income for most retirees, the choices available at retirement are complex, general confidence is low, and the cost of regulated financial advice remains out of reach for many. As a result, people often default into options that are convenient rather than optimal, or act with excessive caution that limits their standard of living in later life.
PensionBee also points to growing pressures on retirement income, including frozen tax thresholds and increasing numbers of people working beyond State Pension age out of necessity rather than choice. Continued instability in pension tax policy risks further harming outcomes by encouraging short-term decision-making that can ultimately reduce long-term income.
PensionBee is calling for stronger, more intuitive default options in retirement, greater stability in pension tax policy, and earlier, more accessible guidance to help people make informed decisions before they reach retirement. The firm also believes there is a strong case for rethinking how retirement income is delivered, including the potential for more automated, flexible drawdown solutions that balance security with ongoing investment growth.
Lisa Picardo, Chief Business Officer UK at PensionBee, said: “Too many people are approaching retirement with expectations that simply don’t match the reality of their savings. The gap between what people need for a reasonable life in retirement, and what their pension is likely to deliver them as an income, is growing - yet individuals are still expected to navigate complex decisions at a time when their confidence is often lowest. Set against an economic backdrop characterised by volatility and uncertainty, and faced with the pressure of rising costs of living,, the need for stability and clarity in pension policy has never been more important. Without clearer information, earlier guidance and support that is easy to access and understand, many savers will continue to make short-term focused, or overly cautious, decisions that may limit their income in later life.”
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