Are you among the 15 million people who could end up in poverty in retirement?

New data reveals that two-fifths of the UK population is not on track for a minimum lifestyle in retirement

Are there any actions you can take to increase your pension?

The number of people in the UK at risk of retirement poverty has increased from 15 million in 2023 to 11.6 million now. Nearly two-fifths of the adult population are represented by this.

The main cause is a higher cost of living. The most recent retirement report from Scottish Widows shows that pension saving levels have actually increased over the past year, with projected retirement income increasing from 15,500 to 17,200.

Self-employed contribution rates, housing, and auto-enrollment are the "three key areas" that the government should "urgently" address, according to Pete Glancy, head of pensions policy at Scottish Widows.

He claims that "helping people make the most of what they have" is the challenge in the interim.

Starting early, raising contributions, and locating lost pension pots are all actions savers can take to increase their pension. With a longer investment horizon, younger savers may also think about modifying the risk profile of their investments, if appropriate.

Glancy asserted that "having a strong sense of financial independence plays a key role in ensuring people feel financially empowered to make informed decisions and take proactive steps for their future."

Who are the groups most vulnerable to a pension deficit?

Self-employed people, Gen Z, and those with low to moderate incomes are among the groups most at risk.

A quarter prioritize their emergency savings fund over their pension, indicating that younger savers are more likely to concentrate on other life goals. Pensions may be in danger of being overlooked, as Gen Z savers' primary financial objectives also included house deposits and vacations.

Twenty-three percent of young adults in their twenties will only be able to afford a minimal standard of living, and 42 percent are at risk of living in poverty in retirement. Thirteen percent of respondents claim they are unable to save any money for retirement or other objectives.

When it comes to pension contributions, low-to-middle-earnersthose in their 30s who make between £20,000 and £35,000 annuallyare finding it difficult to make any more than the default 8 percent.

When they retire, the income of this group drops by 60%, with 70% of them seeing their income cut in half, according to Scottish Widows.

Since self-employed individuals are not subject to auto-enrollment regulations, they may have to deal with an even more difficult savings environment.

Only 25% are on track for a minimum standard of living in retirement, while more than half are at risk of not being able to meet their basic needs, according to Scottish Widows.

Of self-employed individuals, 23% are not saving any money at all.

Paul Leandro, a partner at pension consultancy Barnett Waddingham, stated, "The insufficiency of pension contributions is a concern we see year in and year out, and without clear, decisive action for change, the ticking timebomb of the UK's pension system could soon blow up in our faces."

"To make matters worse, millions of self-employed people do not have the safety net that is provided to employed workers through auto-enrollment in a workplace program.

Although the new pensions minister's pledge to address retirement adequacy is encouraging, the details will now become more complicated. We cannot afford another year of policy inertia or delays, or else a Dickensian future in which people must work well into old age in order to survive is imminent.

What is required to have a comfortable retirement?

A comfortable retirement has become much more expensive in recent years due to high inflation.

A single person requires a retirement income of 43,100 annually, while a couple requires 59,000, according to the most recent statistics from the Pensions and Lifetime Savings Association (PLSA).

A basic retirement costs 14,400 and 22,400, respectively, while a moderate retirement costs 31,300 for single people and 43,100 for couples.

Housing expenses are not included in these numbers, so retirees who are still making mortgage payments or renting may end up paying much more.

The cost of operating a car and travel abroad are not covered by a basic retirement.

The amount that savers need in their pension fund to pay for this may surprise them.

We entered the following figures into MoneyHelpers' annuity comparison tool: if a 65-year-old wanted to buy an annuity that paid out enough annually to finance a comfortable retirement (i.e., a pension pot of approximately 545,000). e. a little over 43,000 annually).

Depending on your health, the type of annuity product you wish to purchase, and the market annuity rates at the time of purchase, the amount will change.

The quote we produced is based on the assumption that the 65-year-old wishes to buy a single-life level annuity and is in good health.

Savers should, of course, consider the potential significance of the state pension in their retirement plan in addition to annuities and income from private pensions.

Currently, the full new state pension pays just under 12,000 annually, or 230point 25 per week. Individuals without a complete National Insurance record will be paid less.

Every year, the state pension is increased by either 2 to 5 percent, or in accordance with inflation or earnings growth, whichever is higher. This "triple lock" policy is costly for the government to uphold, and although Labour has pledged to keep it in place until the end of this parliament, it may not last forever.

Even with the triple lock, single pensioners who receive the full new state pension still lack the funds necessary to maintain a minimal standard of living unless they also receive additional income from a private pension.

According to PLSA statistics, a basic retirement benefits a single person £14,400 annually, while the full new state pension currently disburses slightly less than £12,000.

How to increase your pension.

To increase their pension and raise their chances of a comfortable retirement, savers can take certain actions. If you can, increasing your pension contributions is one of the best things you can do.

One way to do this that may be tax-efficient is to sacrifice your salary. A salary sacrifice agreement is one in which you forgo a portion of your income in exchange for a non-cash benefit, such as pension contributions. You will pay less in taxes since your pay is deducted before income tax and national insurance.

A middle-class individual earning £35,000 could save 140 in taxes by increasing their pension contributions by 2 percent, according to calculations from the investment platform Interactive Investor. This would result in a total tax savings of £8,458 over a 40-year period.

If the investment platform assumes a 5% annual return and 2% wage growth, this would lead to an additional 22,933 in pension savings.

Senior personal finance analyst at Interactive Investor Myron Jobson stated, "It's a smart, tax-efficient way to build long-term financial security for those who can afford it."

Naturally, even better outcomes may be achieved by those who increase their pension contributions by more than this (though be sure to read up on the annual pension allowance).

Scottish Widows advises putting 1215 percent of your pay into your pension as a general rule to help you have a comfortable retirement. This covers both your employer's and your own contributions as well as any tax breaks. You can take advantage of the power of compound returns by beginning early.

Consider the benefits and drawbacks of the various risk profiles that are available to you within the default funds that your pension provider offers. This is another piece of advice for younger savers. When appropriate, younger savers in low- or medium-risk default funds might think about switching to their pension provider's higher-risk default fund in order to benefit from a longer investment horizon.

Global stocks and other volatile assets have a higher potential return than bonds, but higher-risk default funds will typically allocate a larger portion of their assets to these types of assets. The effects of this volatility are usually mitigated over a few decades of investment horizon. Your pension provider will then usually shift you into less volatile investments as you get closer to retirement, thereby de-risking your portfolio.