One in five (20%) UK workers are facing a retirement shortfall despite having relatively high earnings, according to a new study from the Pensions Policy Institute (PPI).
The report, which modelled six representative worker profiles, highlighted that many higher earners suffer from comparatively lower pension contributions.
The research highlighted employer contributions as one of the key drivers of contrasting pension outcomes between higher and lower earners.
It challenges assumptions that the issue of retirement inadequacy can be understood primarily through earnings.
The PPI report calls on the Pensions Commission to take a more holistic perspective to policy, considering where additional saving can realistically come from, how earnings and pension saving are unevenly distributed across the working population, and how institutional pension provision plays a critical role in retirement adequacy.
Lauren Wilkinson, senior policy researcher at the Pensions Policy Institute, said: “There is not one single adequacy challenge, and therefore no single policy response that will be equally effective across the workforce. People face different barriers to building adequate retirement incomes, shaped not just by their earnings, but also their capacity to save and the employer provision available to them.
“As the Second Pensions Commission develops its recommendations, our analysis highlights the need for a more nuanced, cross-cutting approach that considers pensions alongside housing and wider household wealth, as well as the respective roles of individuals, employers, and the state.”
To assess how retirement outcomes differ between profiles, a set of representative individuals were modelled across working life and into retirement using the PPI's Individual Model. These include individuals who spend their whole lives in one profile, as well as those who move between profiles.
The specific outcomes modelled for each individual were fund size and contributions throughout working life, as well as income in retirement. Assessments of adequacy were based on Pensions UK’s widely used Retirement Living Standards.