Steve Webb, a partner at consultant Lane Clark & Peacock and a former U.K. pensions minister, said: "These latest estimates of the budgets we will need in retirement are a wake-up call to government and the pensions industry alike.
"The government is still dithering about whether and when to implement a set of modest increases to the amount being saved into pensions under the auto-enrollment rules. Without urgent action we are likely to see more and more people facing an unenviable choice between an extended working life or a poor retirement."
The U.K.'s state pension "triple lock," introduced under Webb in 2010, currently acts as a safeguard against rising retirement living costs, and resulted in an 8.5% increase to just more than £11,500 annually in retirement benefits beginning in April. Current Pensions Secretary Mel Stride is not committed to continuing the triple lock indefinitely, and it was temporarily suspended during the pandemic.
A report by U.K. pension provider NOW: Pensions and the Pensions Policy Institute also showed that on average for women in the country to retire with the same amount of money in their pension savings as men, they would need to work and save for an extra 19 years.
According to NOW: Pensions, on average women spend 10 years away from the workforce to raise families or take on other caring responsibilities. This career gap amounts to an average of £39,000 in lost retirement savings. Furthermore, the cost of child care is a hindrance to many working households, with the average cost of full-time nursery for a child under age 2 in 2023 being £14,800 a year. As a result of these factors, by their late 50s women will have built up only 62% of the retirement wealth of men.
"The scale of the gender pensions gap remains vast and will require bolder policy actions," said Lizzy Holliday, director of policy and public affairs at NOW: Pensions. "Setting out the road map for the future of auto enrollment including tackling the difficult issue of adequacy in retirement — which affects women disproportionately given lower pension wealth — should be front and center of next steps."
Women make up 79% of workers who earn less than the current auto-enrollment earnings threshold of £10,000, which means that 1.9 million employed women are not automatically enrolled into a private workplace defined contribution plan. If both the earnings threshold and age threshold of 22 were removed from auto enrollment, an additional 885,000 employed women would become eligible for a workplace retirement plan, according to NOW: Pensions.