Pensions gap grows to more than £31,000

The average household is £31,546 short in their savings of the amount needed to give them a moderate standard of living in retirement, four times higher than five years ago. The percentage of households on track for a moderate retirement has fallen to just 36.4%, according to the latest data from HL’s Savings and Resilience Barometer. There are wide variations in the pensions gap across the country. The most resilient local authority Wokingham has a pension gap of just £265. Households in Kingston upon Hull (the least financially resilient authority overall) on average are £54,641 short of what they need for a moderate retirement. When looking at median pension gap in isolation, authorities around London make up the majority of the bottom ten with pension gaps of over £70,000. Later life financial resilience has fallen across all income groups since the pandemic, according to the statistics. Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Retirement resilience has dropped from 38% just six months ago to 36% with middle to low-income households hardest hit.” She said the fall was due to rising inflation boosting the amount of money needed for a moderate retirement with the pension gap opening up to £31,546 – four times more than it was in 2019. Added to that was the cost-of-living crisis which had a bruising impact on people’s finances and which many households are still grappling with. Ms Morrissey said there are several ways the gap can be closed. “The government’s ongoing Pensions Review is looking at how to deliver better outcomes for members. “Moves to reduce lost pensions and the proliferation of small pots will do much to ensure much needed pension savings do not go astray so people know how much they have. “We urge the government to continue to look closely at the potential of the Lifetime Pension to boost engagement as well as competition in the industry.” She said that increasing auto-enrolment minimums beyond the current 8% is also an option but should not be implemented without consideration of the impact it would have on people’s short-term financial resilience.

Pensions gap grows to more than £31,000

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