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"Zombie retirement crisis": Nearly half of Brits sleepwalking into pension shortfall

ended 21. July 2025

A looming pensions crisis is creeping up on the UK, with nearly half of working-age Brits on track to fall short financially in retirement, and many won’t realise the problem until it’s far too late, financial experts have warned.

New analysis from the Department for Work and Pensions (DWP) has revealed that 43% of working-age adults – equivalent to 14.6 million people – are undersaving for retirement. And it’s not just low earners feeling the pinch. Even among the top earners bringing in over £67,000 a year, nearly 1 in 2 (48%) are projected to fall short of what they’ll need later in life.

Scott Gallacher, Director at Rowley Turton, called the trend a “zombie retirement crisis” that’s “slow, quiet, and being ignored”, warning that a good salary now doesn’t guarantee a comfortable retirement.

“This is a massive threat. Auto-enrolment got people started, but contribution levels are too low and haven’t kept up with reality,” said Gallacher. “We’re heading for a future where millions simply won’t have enough to live on.”

The figures also show that future retirees are expected to be worse off than today’s pensioners, despite years of workplace saving. According to the DWP, private pension incomes for those retiring in 2050 could be 8% lower than those retiring today. Meanwhile, the State Pension is set to make up a growing proportion of retirement income, especially for lower earners.

This comes as the government faces mounting pressure to address pensions adequacy and rebuild momentum following the Turner Commission’s landmark work in the mid-2000s. While auto-enrolment was introduced off the back of that report, experts say it’s now in desperate need of reform and fresh ambition.

Samuel Mather-Holgate, Independent Financial Adviser at Mather and Murray Financial, blamed the cost of living crisis for making saving near impossible for younger generations. “It’s virtually impossible for anyone under 40,” he said. “Mortgage costs are higher, utilities have gone up, and day-to-day expenses are way above where they were five years ago.”

He added that many people “put off thinking about their pension until they’re five or ten years off needing it”, missing out on vital years of compounding growth. Without early action, he warned, we’ll see “more people working until they drop”.

The DWP also found huge disparities between different measures of pension adequacy. Using the PLSA’s Retirement Living Standards (RLS), a third of workers don’t even meet the minimum expected income, rising to 91% failing to meet the ‘comfortable’ standard.

Chartered Wealth Manager Philly Ponniah said it’s not down to apathy, but confusion. “The numbers are worrying, but they’re not surprising. There’s a real gap between intention and clarity,” she said. “We talk about ‘target replacement rates’ like everyone knows what that means, when most people are just trying to get through the week.”

Even among high earners, she added, there’s often an assumption “things will just work out” – a dangerous bet without proper planning.

Ross Lacey, Director at Fairview Financial Management, believes pensions suffer from a serious image problem. “People still see them as one-size-fits-all,” he said. “More awareness that pensions are just a savings wrapper, and that you can access a wide range of investments inside them, could really help shift the dial.”

But for many, structural inequality remains a roadblock. The report found that women who take career breaks or work part-time can end up with pensions that fall far below the target. A median-earning woman retiring at 60 after just five years off and five years part-time could end up with just 52% of the income she needs, far below the 67% benchmark recommended by the original Pensions Commission.

Gosia Dawson, Director at Glade Financial, called it a crisis in waiting: “For women especially, the impact of time out of work and part-time jobs is huge. That’s not a gap, that’s a looming crisis.”

Still, she says it’s not too late to act: “Whether you earn £20,000 or £200,000, a clear plan can help close the gap. Auto-enrolment is just the starting point. We need better engagement with pensions and more personalised advice, especially for women.”

With the pension age likely to rise again, experts are urging the government to overhaul retirement education and empower people to take action before it's too late.

As Mather-Holgate put it: “The government needs to roll out a proper education programme around retirement, and why it should be a priority.”

5 responses from the Newspage community

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Samuel Mather-Holgate
Managing Director & IFA at Mather and Murray Financial
The cost of living crisis has made saving for retirement really hard, and virtually impossible for anyone under 40. Mortgage costs are higher, utilities have gone up, and day-to-day expenses are way above where they were five years ago.
Lots of clients put off thinking about their pension until they’re five or ten years off needing it. Even though they then put a higher chunk of income in, they miss out on years of compounding, which makes a big difference.
The state pension age looks set to rise again as the government tightens the purse strings, and that means an ageing workforce and more people working until they drop. The government needs to roll out a proper education programme around retirement, and why it should be a priority.
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Philly Ponniah
Chartered Wealth Manager and Financial Coach at Philly Financial
The numbers are worrying, but they’re not surprising. Plenty of people earning good money still aren’t saving enough for retirement; not because they don’t care, but because no one’s helped them picture what they’ll actually need.
There’s a real gap between intention and clarity. We talk about ‘target replacement rates’ as if everyone knows what that means, when most people are just trying to get through the week.
Among higher earners, there’s often this unspoken assumption that things will just work out, without anyone stopping to check if they really will. What’s missing is support that actually makes sense, space to think ahead, and language that feels human. Until people connect their pensions to the life they want in their 60s and 70s - not just the numbers - we’ll keep seeing this pattern.
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Ross Lacey
Director & Independent Financial Adviser at Fairview Financial Management
Pensions have a real image problem, and that needs to change. People still see them as one-size-fits-all, when actually they’re just a way to save that can be tailored in loads of different ways.
Too often, we hear people say things like ‘my mate said pensions don’t perform well’ without realising how different each setup can be. Ten people with the same provider could have completely different outcomes depending on what they’ve chosen to invest in, how much they’re paying in fees, and how their pot is structured.
More awareness that pensions are just a savings wrapper, and that you can access a wide range of investments inside them, could really help shift the dial. For higher earners, the fear of getting caught out by tax rules puts them off saving more. Raising the annual allowance and increasing the taper threshold would go a long way in encouraging them to keep saving.
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Scott Gallacher
Director at Rowley Turton
The DWP’s latest figures show a zombie retirement crisis creeping in. It’s slow, quiet, and being ignored, but it’s still a massive threat.
A staggering 43% of working-age people are undersaving for retirement. Even among higher earners, nearly half are falling short. A good salary now doesn’t mean a good retirement later.
Auto-enrolment got people started, but the contribution levels were too low and haven’t kept up with reality. With the move away from defined benefit pensions, people are carrying more of the risk and responsibility than ever before.
The DWP expects retirement incomes to barely improve over the next 25 years. Without proper reform, we’re heading for a future where millions simply won’t have enough to live on.
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Gosia Dawson
Director at Glade Financial
These figures are a wake-up call. Nearly half of working-age people are on track to fall short in retirement, including higher earners who often assume their current income will somehow stretch into later life. It won’t without a plan.
For women, especially, the impact of time out of work and part-time jobs is huge. A woman retiring at 60 after a few years off could end up with just over half the income she needs. That’s not a gap, that’s a looming crisis.
The good news is, it’s never too late to take control. Whether you earn £20,000 or £200,000, a clear plan can help close the gap. Auto-enrolment is just the starting point. We need better engagement with pensions and more personalised advice, especially for women.