Almost a third of people, 12.2m, face the prospect of pension poverty in later life, according to the Scottish Widows' Annual Retirement Report published today.
The figure comes from the latest National Retirement Forecast (NRF) projections.
The forecast projects retirement outcomes based on savings, behaviours and income sources, comparing expected income to potential living and housing costs in retirement.
The good news is the report shows a marked reduction in the number of people on track for a less than minimum retirement lifestyle, falling to 31% (12.2m) from 39% (15.3m) in 2025.
But the report warns the current state of the nation's savings is still precarious.
The positive change has been driven by two key factors, it said. First, those not saving in the traditional way through a pension have increased their level of savings elsewhere, and more of those also now expect to own their own home when they retire.
Second, falling energy costs in the short-term have led to more people meeting the minimum lifestyle standard as set out by Pensions UK’s Retirement Living Standards. However, with recent global events pushing energy costs back on an upward trajectory, the positive progress could soon be undone, Scottish Widows warns.
Pete Glancy, head of pension policy at the firm, said: “While the fall in pension poverty compared to a year ago is a step in the right direction, the shift in retirement fortunes is complex and the current state of the nation's savings is still polarised.
“The factors we can control, like how much we save or how much we expect to receive in retirement, may improve, but can easily be thrown off course by shifting external factors like increases to energy and general cost of living.”
He said whatever changes the Government’s recently established Pensions Commission recommends may not be enough to help the current population.
Scottish Widows is calling for the following policy measures to improve retirement saving prospects in the UK:
1. Increase the statutory level of saving through auto-enrolment from 8% to 12%
2. Create an equivalent of auto-enrolment for the self-employed sector
3. Accelerated compatibility between pensions and personal financial products (savings, investments, housing equity) to facilitate better retirement journeys
• The research was conducted online by YouGov across a total 6,224 adults aged 18+, weighted to be representative of the UK population, and including a boost of 1,000 adults aged 18+ to better understand the retirement prospects of minority ethnic groups, also weighted to be representative of the UK minority ethnic population aged 18+. Fieldwork was carried out between 16 February 2026 and 24 February 2026.
• Financial Planning Today Analysis: This report reiterates what many other similar studies have said - many millions are not saving enough for retirement. Without a change to the rules, particularly in relation to auto-enrolment and other mass participation schemes, there is little chance of meaningful change. On the positive side people are trying to save more and awareness of the pension shortfall is growing. Change, however, seems frustratingly slow and many are sleep-walking into a retirement of poverty.