The Living Wage Foundation’s Living Pension is an independently calculated savings target, based on the real cost of living, designed to provide an acceptable standard of living in retirement when combined with a full UK State Pension income. It is based on a yearly contribution of 12 per cent of all earnings to an employee’s pension pot, or £2,950 of savings in 2024/25, with at least 7 per cent coming from the employer.

Over 80 per cent of workers with a Defined Contribution pension are not saving enough to achieve a Living Pension pot. With pension incomes set to fall further over the next 20 years, it is more important than ever for businesses to support their workers to live with dignity in retirement by accrediting to the Living Pension standard.

Research summary

This report explores how living on less than the retirement income derived from saving at this rate affects pensioners’ lives. It is based on a poll of 500 people over State Pension Age whose monthly income falls below this level (a ‘low pension’).

Our findings highlight how a low pension negatively affects older people’s health, wellbeing and quality of life. Over half (54 per cent) of people on a low pension are struggling to cover their bills, with some groups – such as people renting their homes, people with health conditions, and people living alone – struggling disproportionately. Many are also cutting discretionary spending, and report that their financial difficulties are negatively affecting their mental health, anxiety and sleep.  A Living Pension can therefore help people to not only cover the bare essentials but live well in retirement.

Key findings:

• 54 per cent of people on a low pension struggle to keep up with bills and credit commitments.
• 35 per cent rely on at least one additional source of income, such as benefits, on top of State Pension, workplace pension and savings.
• 40 per cent report struggling more now than before they retired, with a further 36 per cent reporting no change since retiring.
• Perhaps surprisingly, 42 per cent of people on a low pension self-identified as middle or higher earners during the bulk of their working lives. 35 per cent classified themselves as low earners.
• People renting, people with health conditions and people living alone are struggling disproportionately. For example, 40 per cent of people living alone are in debt, falling to 25 per cent of people living with a partner.
• Since retiring, 48 per cent of people on a low pension have reduced spending on entertainment and hobbies, 45 per cent have reduced spending on leisure travel and holidays, and 43 per cent have reduced spending on gifts and donations.
• 1 in 5  people on a low pension say their level of income is negatively affecting their mental health (22 per cent). 1 in 4 say it is negatively affecting their level of anxiety (26 per cent) and their sleep quality (25 per cent).

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