The average UK household is, on average, £31,546 short of the amount needed to maintain a moderate standard of living in retirement, Hargreaves Lansdown’s Savings and Resilience Barometer has revealed.

The research also found that the percentage of households ‘on track’ for a moderate retirement has fallen to 36.4 per cent, down from 38 per cent six months ago.

Commenting on this, Hargreaves Lansdown head of retirement analysis, Helen Morrisey, said: “Retirement resilience has dropped from 38 per cent just six months ago to 36 per cent with middle to low-income households hardest hit.

“This is due to rising inflation boosting the amount of money needed for a moderate retirement with the pension gap opening up to £31,546 – four times more than it was in 2019.

“Added to this the cost-of-living crisis has had a bruising impact on our finances which many households are still grappling with.”

Hargreaves Lansdown also found large variations across the country in median pension gaps, with the most resilient local authority, Wokingham, having a pension gap of £265.

However, households in Kingston upon Hull, which was the least financially resilient authority overall, were found to be £54,641 short of what they need for a moderate retirement.

Morrisey said there are “massive” regional variations, noting that, when looking at the median pension gap in isolation, authorities around London made up the majority of the bottom 10 with pension gaps of over £70,000.

However, she proposed several solutions to close the gap, including the government’s ongoing Pension Review, which aims to deliver better outcomes for members.

In addition to this, she emphasised that efforts to reduce lost pensions and addressing the issue of the growing number of small pots could ensure “much needed” pension savings do not go astray so people know how much they have.

“We urge the government to continue to look closely at the potential of the lifetime pension to boost engagement as well as competition in the industry,” she continued.

“The ability to choose the pension provider that you want your contributions to be paid to throughout your career could really boost people’s retirement planning.

“It would be far less likely to be lost as you change jobs and gives people an overarching view of what they have which can aid better decision making.

“You will approach one larger pension pot in a very different way than you would several small pots which you might be tempted to simply take as cash and spend.

“The lifetime pension could do much to reduce complexity for the member while ensuring providers give better value.”

Morrisey also suggested that increasing auto-enrolment minimums beyond the current 8 per cent was an option, but emphasised that this “should not be implemented without consideration of the impact it would have on people’s short-term financial resilience”.

She also pointed out the “plight” of the self-employed, noting that this group “lags behind” in retirement provision.

She also raised concerns over recent reports that the government is considering the future of the lifetime individual savings account (Lisa).

“This is a product that could play a major part in boosting the retirement resilience of this group who may need a more flexible solution than a pension,” she added.

“The ability to access your money in times of need -albeit subject to an exit penalty makes the Lisa a compelling prospect for this group.

“Moves to reduce the exit penalty from 25 per cent to 20 per cent and widening the age criteria to enable a Lisa to be opened by older workers could make it more useful still.”

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