Millions of workers whose lives are blighted by physical or mental health conditions face a retirement income squeeze, with half at risk of pension poverty, a major new report warns.
An estimated 50% of adults whose health conditions affect their day-to-day lives are on course for pension poverty in retirement – almost double the 27% rate for the wider population. The research findings from Scottish Widows come amid growing concern that rising levels of long-term sickness are pushing people out of work, reducing earnings and leaving them with smaller pension pots.
Under the latest retirement projections, pension poverty means having an income below the minimum level needed to achieve the retirement lifestyle standards set by the Pensions UK Retirement Living Standards.
The report highlights how health problems can derail careers years before retirement. While 60% of UK adults believe they will be fit enough to continue working until their planned retirement age, almost three in 10 (29%) say their physical or mental health has affected their ability to work during the past five years.
For many, the impact has been severe. One in 10 (10%) said they had stopped working altogether because of health issues, while 7% had reduced their hours and 6% had moved into less demanding or lower-paid jobs.
The report warns that these disruptions can have a lasting effect on retirement prospects by reducing pension contributions and making it harder to build up savings.
Separate research published this week by the Pensions and Lifetime Savings Association found that a single pensioner now needs around £13,400 a year to achieve a minimum standard of living in retirement, rising to £31,700 for a moderate lifestyle and £43,900 for a comfortable retirement.
Against that backdrop, many people with health conditions are facing a growing risk of falling short. The study also found widespread anxiety over the potential cost of care in later life.
More than a third (34%) of adults have not yet considered how they would pay for care if they needed it, while 51% are not confident they could afford it. Among those living with a physical or mental health condition, concern is even greater, with 67% lacking confidence in their ability to meet future care costs.
Susan Hope, a pension expert at Scottish Widows, said: “Navigating health challenges is something which many of us will have to face in our later years.
“Whether it’s managing a chronic condition, mental burnout, or working through menopause, physical and emotional struggles often force people to change their working patterns, cut back their hours or drop out of the workforce altogether.
“This just doesn’t affect our day-to-day lives, it often knocks our long-term financial plans off track too.”
She said workers could improve their retirement prospects by taking simple steps such as checking pension balances, reviewing retirement goals and considering whether employers would match additional pension contributions.
Scottish Widows said earlier and greater pension saving, better take-up of income protection and critical illness insurance, and more tailored financial guidance could all help reduce the financial damage caused by poor health.
The research was carried out by YouGov among 6,224 UK adults in February and formed part of Scottish Widows’ latest Retirement Report.