Pensions Commission warns millions face a retirement shortfall — where property wealth fits in

The scale of the adequacy challenge

The second Pensions Commission’s interim report described a structural adequacy challenge in the UK retirement savings system. Using a range of assumptions, it found that between 15 and 19 million working-age people are projected to fall short of their target retirement income replacement rate — the proportion of pre-retirement income needed to maintain a similar standard of living.

The groups facing the greatest structural barriers include women, carers, the self-employed, and some ethnic minority communities — populations where participation in workplace pension schemes is lower, or where working patterns create gaps in contributions. The Commission proposed a hybrid approach to measuring adequacy that combines replacement rates with minimum income benchmarks, to better capture the range of circumstances people retire into.

The decumulation warning

Alongside the savings gap, the report flagged a separate concern about how pension savings are being drawn down. Around half of pension pots are accessed via full cash withdrawal — a pattern the Commission noted could exhaust savings within 10 years for many retirees, particularly if withdrawal rates are not calibrated carefully against life expectancy and other income sources.

Perhaps more striking: three-quarters of defined contribution (DC) savers over the age of 40 have no clear plan for how they will access their pension when the time comes. Without a structure for drawing down savings sustainably, ad hoc or pressure-driven decisions — like the pre-Budget withdrawals documented in separate Quilter research — become more likely.

What is working

The Commission’s interim report was not uniformly pessimistic. It described the State Pension as an “indispensable foundation” for retirement income, and noted that auto-enrolment has significantly increased participation in workplace pensions since its introduction. These foundations are working. The challenge is in the layer above them — the additional savings that are needed to maintain most people’s living standards in retirement.

Final recommendations are not due until 2027, and no policy changes have been confirmed. This is a report about the scale of a problem, not a set of changes that are happening now.

Where property fits in the retirement picture

For many people currently in or approaching retirement, the home is the largest single asset they hold — often worth significantly more than their pension pot, and often unconsidered in retirement income planning. In a context where pension adequacy is under scrutiny and decumulation patterns are poorly planned, property wealth represents an underused resource.

Equity release products — including lifetime mortgages — allow homeowners to access a portion of their property’s value without selling or moving. They are not right for everyone, and they affect inheritance and long-term finances, but for some homeowners they provide a meaningful way to supplement income or manage lump-sum costs in retirement without depleting pension savings prematurely.

The broader point is that retirement planning works better when it draws on the full picture: pension savings, State Pension entitlement, other assets, and — for homeowners — property equity. The Commission’s findings underline why the pension piece alone often is not enough.