Nearly Half of UK Workers Shun Pensions

Daily survival often trumps long-term financial security for many

A significant portion of the UK’s working population is failing to contribute to private or workplace pensions, with younger, lower-earning, and self-employed individuals most likely to be excluded. This trend raises concerns about future financial stability, as many prioritize immediate needs over retirement planning.

‘Survival-Based’ Decisions Drive Pension Abstinence

Twenty-nine-year-old Mohaimon, who hails from Bangladesh and works in London’s hospitality sector, has opted out of his workplace pension. He explains his reasoning: “I am more worried about surviving day-to-day than worrying about the future.” He finds the concept of long-term pension saving disconnected from his current reality, stating, “The whole dream of having a good job and paying in to a pension doesn’t feel like it applies to me.” Instead, Mohaimon aims to save for a house deposit, believing it to be a more pressing financial goal.

Daily Expenses Leave No Room for Pension Contributions

Saira Amir, a 46-year-old self-employed stylist in Norfolk, also finds herself unable to contribute to a pension. She relies on universal credit to cover essential expenses, including groceries and daily travel to clients. “Being self-employed in this job is risky,” she remarks, while also expressing a desire to open her own salon. The income she receives, she states, “isn’t enough” to also save for retirement.

The situation is particularly acute for certain demographics. Government figures reveal that individuals of Pakistani or Bangladeshi heritage are less likely to have a pension, with only one in four possessing one. Furthermore, women, the self-employed, and those with lower earnings are also disproportionately represented among those not saving for their future.

State Pension Falls Short of Living Standards

For those without private or workplace pensions, reliance falls upon the state pension. To receive the full amount, individuals typically require 35 years of qualifying National Insurance contributions. The projected full state pension for 2025/26 is £230.25 per week, equating to £11,973 annually. However, the Pensions and Lifetime Savings Association estimates that a minimum retirement living standard requires £13,400 per year for a single person, highlighting a potential shortfall.

Auto-Enrolment Success Faces Economic Realities

The UK’s auto-enrolment scheme, introduced in 2012, mandates that employers offer workplace pensions and automatically enroll eligible employees. While generally considered successful, with low opt-out rates, the scheme’s criteria exclude the self-employed and those under 22. For eligible workers, a minimum of 5% of earnings above £6,240, plus a 3% employer contribution, is automatically saved. This system is designed to supplement the state pension, and contributions benefit from tax relief, meaning basic and higher rate taxpayers effectively pay less for their pension savings.

Despite these provisions, the immediate financial pressures faced by many, like Saira Amir, mean that retirement savings remain an unaffordable luxury. This contrasts with the perspective of Victoria Olsena, a 38-year-old AI marketing consultancy owner, who earns £50,000 annually and contributes to both a pension and an ISA. She expresses concern for others, urging them to plan ahead: “People should realise that the future is going to be terrible and they should do something about it.” Financial experts emphasize the compounding benefit of early and consistent saving, noting that it becomes significantly harder to catch up on lost contributions later in life.

The long-term implications of this widespread pension avoidance are significant. A 2023 report by the Financial Conduct Authority indicated that around 3.8 million adults in the UK are “financially vulnerable,” facing challenges in managing their money, which would likely preclude pension saving. This points to a systemic issue where immediate economic survival overrides long-term financial planning for a substantial segment of the workforce.