Current pensions are failing to deliver satisfactory retirement outcomes for many people in disadvantaged groups new research has found.

The research, supported by the Centre for Ageing Better, explored how disadvantage builds across the life course to shape retirement outcomes. It shows that certain groups of people need a greater safety net to protect them from an impoverished retirement.

A lack of stable employment, steady earnings and the capacity to engage with their saving, has left some adrift of the saving levels required to deliver an adequate income in retirement.

The research draws on 52 studies, including national surveys, government and administrative data, and interview and case study research. 

It concludes that ethnicity, gender, disability and socio economic background shape how people are treated by and within labour markets, institutions and government policy systems. Some groups are more likely to experience low pay, insecure work, caring responsibilities and ill health.

However the system is designed around stable, full-time employment with steady earnings and time to engage. When lives do not follow this pattern, gaps can open early and repeat. By the time people reach later life, these gaps can be reflected in smaller pensions, lower saving, leading to weaker resilience and greater reliance on means tested support.

These gaps show up in real decisions and constraints. People opt out of pensions because they need the money now. They miss out on saving because they earn just under the threshold or work multiple jobs.

Caring responsibilities often mean cutting hours or leaving work altogether. Ill health can end a working life early. By the time people are in their 50s and 60s, they are often trying to navigate complex systems with limited time, low engagement and little room for error.

Levers to improve outcomes

These outcomes are not inevitable but without change more people will reach retirement with limited resources because the system does not reflect how many people live and work. 

Extending pension coverage to low earners and insecure workers, protecting saving during periods of caring and ill health, and making systems easier to use can all improve outcomes.

Elaine Smith, Head of Age-friendly Employment at the Centre for Ageing Better, said: “This detailed report makes clear how disadvantage and inequality compound throughout people’s lives, culminating with people left in extremely perilous financial positions upon retirement and feeling worried about their futures.

“Our working lives and patterns are changing, we need pension and savings systems that reflect this and which provide a better safety net for when we’re hit by unforeseeable shocks in mid-life. We cannot continue to tolerate what are currently unacceptable levels of pensioner poverty, particularly among certain groups.   

“We hope the government will explore the implications of the content of this report and see what is feasible to help support those least able to save for a pension. Improving access to pensions guidance, paid carer’s leave and exploring greater flexibility around claiming the state pension could all lead to meaningful change to people’s quality of life in retirement.”

Catherine Foot, Director at the Standard Life Centre for the Future of Retirement said: “Saving into a pension is crucial for building security later in life, but this research shows clearly that it’s far from an equal journey.

“Life doesn’t follow a straight path, and how people work, earn and care over a lifetime looks very different from the assumptions baked into our pension system. As jobs, earnings and caring responsibilities change, our pension system needs to catch up with the realities people face, or more will reach retirement without enough to live on.”