Middle Class Britain Squeezed by 60% in Retirement

The number of middle income households in the United Kingdom who face a severe squeeze on their income in retirement is significant and increasing according to a new report from Chatham House.

Around 15 million UK households in the middle income group risk a reduction in their income of almost 60% from their pre-retirement income.  In addition, around 10 million households – the poorest 40% – risk having to live mostly off state pension provision that only just ensures a minimum standard of living.

“The UK is relatively unique in the degree of experimentation in its pensions system. Because of its reforms, the UK should not expect a pensions crisis such as that faced by Germany or France, in which the state is committed to generous pensions for an aging population,” said Paola Subacchi, one of the authors of the report. “However, the UK has a distinct problem with middle income earners who are failing to save enough and are likely to find the drop in income during retirement unexpected and unacceptable.”


The current savings deficit clearly indicates a failure of existing tax incentives for pensions and more radical measures should be considered.

The report recommends that the UK government look at guaranteeing minimum annuity rates, providing matching schemes for pension contributions and improving access to financial advice.

The scale of the reductions in income and the potential for dashed expectations about individuals’ quality of life in retirement raise the specter of future political and fiscal pressures.


View a copy of the report here.