Fewer than four in 10 (39 per cent) UK households are on track for a moderate income in retirement, analysis by Hargreaves Lansdown has found.

This represents a 3 percentage point fall from the 42 per cent of households that were on track for a moderate retirement six months ago.

Just over two-thirds (69 per cent) of the highest fifth of earners were in line for a moderate retirement income, although Hargreaves Lansdown warned that this was “unlikely to meet their needs”.

Less than a third (30 per cent) of the highest earners were on track for a comfortable retirement, down from 32 per cent six months ago.

Overall, only 15 per cent of households were on the path of having a comfortable retirement income.

The levels needed for a moderate and comfortable retirement income are defined by the Pensions and Lifetime Savings Association’s Retirement Income Standards.

Hargreaves Lansdown noted that rapidly rising inflation had meant that the amount needed for a moderate and comfortable retirement had grown quickly, and pension values had not kept pace.

“The cost-of-living crisis has squeezed our budgets tight, robbing us of our financial resilience today as well as for tomorrow,” stated Hargreaves Lansdown head of retirement analysis, Helen Morrissey.

“This dip is down to several factors -soaring inflation has pushed up the amount needed to qualify for a moderate retirement from £20,800 per year to £23,300 and the value of our pensions has not grown at the same rate.

“Added to this the pressures of meeting increased day to day costs mean we have less left over to put towards our pensions which makes it a struggle to maintain, never mind increase our savings.

“It means that more of us have a nasty shock in store as we approach our retirement years. Only 38 per cent of the over-60s are in line for a moderate income and with very little time left to make up ground many face making difficult decisions around when, how and even if they retire.

“The cost-of-living crisis has hollowed out our finances and it is fair enough that people have prioritised keeping themselves afloat in the here and now rather than stressing about retirement. Many people will have time to rebuild their retirement planning when things improve.

“Older workers on the other hand have far less time and we could see more choosing to stay in work for longer to try and make up ground. Recent government jobs figures showed signs of people who had previously retired choosing to go back to work and we will likely see this trend increase.”

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