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For many of us, a workplace pension is the backbone of retirement planning. But even with regular contributions, pension income on its own may not always match what people hope retirement will look like.
That difference between expected retirement lifestyle and projected retirement income is often called the “pension savings gap”. It’s not a judgement on anyone’s choices or circumstances – it’s simply a way of explaining why retirement planning often includes more than one type of saving.
Below, we explore some of the biggest, widely recognised reasons this gap can appear – and how pensions typically fit into a broader savings picture.
Many people may spend two decades or more in retirement, depending on when they stop working and how long they live. That can mean savings (including pensions) may need to cover a longer period than earlier generations expected.
The age at which people can access certain retirement income has also evolved over time. For example, the UK State Pension age is currently 66 and is scheduled to rise to 67 between 2026 and 2028 under current legislation.
This is one reason why retirement income is often discussed in terms of sustainability over time – not just the size of a pension pot on day one.
Marcus has explained previously that inflation can reduce purchasing power over time – meaning the same amount of money may buy less in future.
Over a long retirement, changes in prices can affect how far a fixed level of income goes. This is one reason some people consider holding different types of assets or savings alongside pension.
The UK State Pension provides an important baseline of income, though the amount someone receives can vary depending on their National Insurance record and other factors.
Because retirement costs (housing, energy, food, transport, hobbies, travel, support for family, and so on) vary widely, many people view the State Pension as a starting point – with workplace pensions and other savings helping to fill in the rest.
Career patterns have changed. People may:
Any of these can affect how consistently someone contributes to a pension – and therefore what their retirement income looks like later on.
This highlights why pensions alone may not be enough to meet retirement expectations, even for those who are saving consistently and making the right decisions.
Automatic enrolment has brought more people into workplace pensions. The minimum total contribution rate is 8% of qualifying earnings, which is split between 3% from the employer and 5% from the employee. However, some people may still see a gap between minimum saving and their personal retirement goal, especially if they expect a higher – cost retirement lifestyle.
Independent research also explores how retirement outcomes can vary depending on saving patterns, retirement timing and life expectancy.
Retirement is increasingly personalised.
Some people aim to slow down gradually, combine part-time work with retirement, or prioritise experiences earlier. Others are inspired by the FIRE movement (Financial Independence, Retire Early), which focuses on building enough resources to have greater work – optional flexibility earlier in life.
You don’t have to pursue “early retirement” to take something useful from the trend – it mainly highlights that people’s retirement timelines and goals can differ a lot, which can widen or narrow the “savings gap” depending on what someone is aiming for.
Pensions are often just one part of a longer-term plan. Depending on goals and time horizons, people may also use other types of saving to support retirement – for example:
These options aren’t “better” or “worse” universally – they’re simply different tools that can play different roles.
Marcus research has previously highlighted how people use a mix of accounts, including Cash ISAs and fixed – rate products, as part of their broader savings picture.
Another factor that sometimes comes up in retirement conversations is housing. Some people view their home as part of their broader retirement resources, particularly if they plan to downsize later in life.
However, the role housing may play can vary widely. Property values, moving costs and the availability of suitable homes can all affect how much equity might realistically be released. In some cases, the price of smaller homes or flats may also have risen over time, which can influence how much difference downsizing ultimately makes.
For this reason, housing is often discussed alongside – rather than instead of – other forms of retirement saving when people think about their long-term financial picture.
The idea of the savings gap isn’t to create pressure – it’s to help people understand the moving parts that shape retirement outcomes.
Reviewing long – term goals from time to time (especially when circumstances change) can help people build a more complete picture across pensions, savings, and expected spending – and spot any gaps early enough to plan around them.
Marcus aims to provide clear products and information about saving. Whether you’re just starting out or fine–tuning your financial approach, small steps today can support your future plans.
This article is for informational purposes only and is not a substitute for individualised professional advice. Articles on this website were commissioned and approved by Marcus by Goldman Sachs®, but may not reflect the institutional opinions of The Goldman Sachs Group, Inc., Goldman Sachs International Bank, Goldman Sachs & Co. LLC or any of their affiliates, subsidiaries or divisions. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice. This article is not a product of Goldman Sachs Global Investment Research. The information contained in this article does not constitute a recommendation from any Goldman Sachs entity to the recipient, and Goldman Sachs is not providing any financial, economic, legal, investment, accounting, or tax advice through this article or to its recipient. Neither Goldman Sachs nor any of its affiliates makes any representation or warranty, express or implied, as to the accuracy or completeness of the statements or any information contained in this article and any liability therefore (including in respect of direct, indirect, or consequential loss or damage) is expressly disclaimed.
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