Laura Mason: A better retirement does not happen by accident
Too many people in the UK are not building up the level of savings they will need for later life. For many, this means facing a retirement where income is stretched and financial security is uncertain.
Addressing this requires more than incremental change. It calls for coordinated action across policy, industry and employers to deliver the system improvements and practical support that will improve outcomes.
At L&G, our Decades Ahead programme is focused on doing exactly that, bringing together research (both our own and that of broader industry experts), policy engagement, and learnings from our clients and industry colleagues to improve long-term financial wellbeing.
As part of this work, we surveyed more than 8,000 working-age adults to better understand not just who is off track, but why and what changes will make the greatest difference.
We also created a new measure of retirement income adequacy that tracks all the key dimensions of financial security in retirement. This looks at whether people can meet a minimum standard of living; whether they can maintain a proportion of their pre-retirement income and, critically, whether they can cover housing costs in retirement.
Using that measure, our research shows that 41% of people in work between the ages of 25 and 55 are not on track for the retirement income they will need.
The reasons are complex and multi-layered. Financial wellbeing in later life does not depend on earnings and saving alone. Just as pension contributions compound over time, so too do inequalities, life events and structural barriers shaping people's ability to build financial security across decades.
The sharpest edge of the adequacy challenge
Nowhere is this more visible than among those currently aged 40–54 - around five million people in this group are off track for an adequate retirement. This is a generation shaped not just by the timing of pension policy, but by the complexity of the systems they've had to navigate. Caught between two eras, they sit at the intersection of defined benefit, stakeholder and defined contribution schemes, often holding a mix of all three or experiencing significant gaps between them.
This fragmentation has consequences beyond contributions alone. Unlike the generation before them, many of whom could rely on the clarity and security of final salary pensions, midlifers today lack a clear benchmark for what ‘good' looks like. And, unlike younger workers, they have not benefited from automatic enrolment across their full working lives. The result is a cohort that is not only under-saving but under-informed with hugely varied pension journeys and circumstances that make it difficult to compare with peers, learn from the previous generations or feel confident in their position. This complexity is a key driver of low engagement: for many, pensions are not just insufficient but increasingly hard to understand and act on.
By midlife, the average pension pot stands at £27,000. For some groups, the outlook is more stark: renters have median pension savings of just £4,000, while part-time workers have £6,000. Set against what could be 25 years or more in retirement, that offers limited resilience.
A window of opportunity
Despite the challenges, the outlook for those in midlife is not fixed. Many still have a meaningful window of opportunity, perhaps even decades, in which to contribute, benefit from investing and improve their retirement prospects.
Our modelling shows that even relatively late starts can make a difference. A 47-year-old contributing at the minimum rate over 20 years could build a pension pot of £116,000, generating a materially higher level of income in retirement alongside the State Pension.
However, one of the most important findings from our research is that this potential is not always translating into action. Among those aged 40 to 54, awareness of the challenge is often accompanied by pessimism, with many assuming it is already too late to change their outcome.
This suggests how we frame the challenge is just as important as the challenge itself.
For this cohort, messaging that focuses solely on the scale of the problem risks reinforcing disengagement. Our research indicates that people in midlife respond more positively to communications that emphasise the possibility of improvement, particularly when this is grounded in realistic, actionable steps.
From awareness to action
There is no one-size-fits-all approach to improving outcomes. Different cohorts face different barriers, and engagement strategies need to reflect that — with approaches that are tailored, relevant and grounded in people's circumstances, and that emphasise the possibility of improvement, rather than the inevitability of shortfall.
But engagement alone will not be enough. Improving retirement outcomes at scale will require coordinated action across the system including the expansion of automatic enrolment, a clear glide path to higher contribution rates, and the rollout of targeted support to help bridge the gap between guidance and advice. This is in addition to addressing some of the wider economics and structural challenges that impact retirement adequacy.
At L&G, we have made tackling pension adequacy a sustained, long-term priority. We are strengthening engagement at key life stages, improving access to guidance, and working with partners to reach those most at risk of under-saving. Data and insight are being used not simply to inform, but to prompt timely, practical action.
A better retirement does not happen by accident. But for millions, particularly those in midlife, it is still within reach if we can come together to turn concern into confidence, and awareness into action.
Laura Mason is chief executive of retail at L&G
