Millions of people in the UK could be heading for a financial shock in retirement, with experts warning that current pension savings levels are far too low. Is a pension crisis looming?

Andy Curran, chief executive of Standard Life, has raised the alarm, warning that Britain is “sleepwalking towards a pensions crisis”, with the issue expected to reach a breaking point in the early 2040s.

At the heart of the problem? Auto-enrolment pension contributions haven’t changed since 2019, and the Government has delayed a promised review, leaving many workers at risk of retiring with too little to live on.

So, how bad is the situation – and what can you do to protect your future?

Why Is There a Pension Crisis?

The UK’s workplace pension system has come a long way since auto-enrolment was introduced in 2012. Millions of workers now save automatically into a pension, with 8% of earnings set aside – 5% from employees and 3% from employers.

But according to pension experts, this isn’t enough.

• 17 million adults aren’t saving enough for a comfortable retirement (Phoenix Insights)
• Many people retiring on defined contribution pensions will have less income than they need
• The issue is expected to peak in the early 2040s, leaving millions short of funds

Curran believes that pension contributions need to rise from 8% to 12% to help workers build a sustainable retirement fund. He estimates that a typical 18-year-old today could have an extra £96,000 in their pension pot by state pension age if the contribution rate was increased.

Why Has the Government Delayed Pension Reform?

There was hope that the Government would increase auto-enrolment contributions, but those plans have now been put on hold.

Labour’s Chancellor, Rachel Reeves, was reported to have blocked a review, fearing that raising pension contributions now would place too much strain on businesses already struggling with economic pressures.

The Government insists the review will still happen – but so far, no date has been set.

What Happens If Nothing Changes?

If the Government doesn’t act, millions of people could find themselves retiring into financial hardship.

1. Lower Pension Income – Those relying solely on auto-enrolment and the state pension may struggle to cover basic living costs in retirement.
2. Rising Living Costs – Inflation means that future pensioners will need more money than today’s retirees to maintain a comfortable lifestyle.
3. Increased Pressure on the State Pension – With fewer workers supporting more retirees, the state pension may become less generous over time.

Without higher savings rates, many workers could be forced to work longer, rely on family support, or downsize their homes in later life.

What Can You Do to Protect Your Pension?

While the Government delays reform, it’s important to take control of your own retirement savings. Here’s what you can do:

✔ Check Your Pension Contributions – If you can afford it, increase your personal contributions above the minimum 5%. Many employers will match extra contributions, so check your workplace scheme.

✔ Track Your Pension Pot – Log into your pension provider’s website to see how much you’ve saved and what your projected retirement income looks like.

✔ Consider a Private Pension – If you’re self-employed or want to save more, opening a private pension (such as a SIPP) can help boost your future income.

✔ Maximise Tax Benefits – Pension contributions come with tax relief, meaning the Government tops up your savings. A basic-rate taxpayer gets £25 added for every £100 saved, and higher-rate taxpayers get even more.

✔ Plan for the Long Term – If you’re in your 20s, 30s, or 40s, small increases in savings now can make a huge difference later.

Final Thought – A Crisis That Can Still Be Avoided

Britain’s pension system isn’t broken, but it needs urgent reform to ensure workers don’t face financial hardship in retirement.

With millions of people under-saving, and Government action delayed, the best thing you can do is take control of your own pension – because the sooner you start, the better off you’ll be in later life.