Pensions UK, the trade body for the pensions industry, has just published its latest Retirement Living Standards report. You’ve probably heard it on the radio, spotted it on the news, or even read the BBC article about it over the last day or so. And honestly, on the surface, the numbers are not exactly cheerful.
Only 23% of the working population are on track to reach what the report calls a ‘moderate’ retirement income.
Just 9% are heading for ‘comfortable.’
Three quarters of UK workers, in other words, are looking at a cliff-edge drop in income the moment they stop working.
The Pensions UK report breaks retirement into three tiers. Think of them as: getting by, living well, and treating yourself.
|
Comfort level |
Single-person household figure |
Two-person household figure |
|
Minimum Covers essentials only |
£13,900 |
£22,500 per year |
|
Moderate Occasional extras and trips |
£32,700 per year |
£45,400 per year |
|
Comfortable Holidays and leisure included |
£45,400 per year |
£62,700 per year |
Source: Pensions UK Retirement Living Standards report, 2025/26
A moderate retirement is what most people would consider a normal standard of living rather than scraping by.
And most people aren't heading for it.
One more thing worth flagging: these figures exclude housing costs. If you're renting in retirement, or still carrying a mortgage, the number you need could be higher.
The 77% of workers not on track are on defined contribution pensions.
The LGPS is not like that. It provides a guaranteed, inflation-linked income in retirement. It doesn’t wobble when the FTSE has a bad week. It doesn’t depend on whether you picked the right fund. It just accumulates. Reliably.
Employers also make substantial contributions on members’ behalf. So, LGPS members often begin their retirement journey from a stronger position than the average UK worker
But starting from a better place doesn't mean you'll automatically land where you want to be…
Someone who spent 25 years in the LGPS on an average pensionable salary of £28,000, with no payrises, could build a pension of around £14,300 a year. Add the full State Pension and total retirement income could reach around £26,847 a year.
That's above the minimum standard. Comfortably inside moderate territory. For a couple where both partners have LGPS or similar careers, you're looking even better.
But what if you want comfortable? What if your housing costs aren't covered? What if you've had career breaks, or worked part-time for stretches of your career? Suddenly that gap could become very real, and worth doing something about.
Your LGPS pension is built up as a proportion of your pensionable pay each year. So if you’ve worked part-time, taken career breaks, or spent time earning less, you may have built up less pension than expected. This disproportionately affects women, who are more likely to have reduced their working patterns for caring responsibilities.
The good news: if you took an unpaid period of maternity, paternity or adoption leave, you may be able to buy back the pension you missed through a Shared Cost APC. Apply within 30 days of returning to work and your employer will typically cover two-thirds of the cost; after that, you’ll usually need to pay the full amount yourself.
So if there’s a shortfall between where you're projected to land and where you want to be, here's what you can do about it.
Option 1: Additional Pension Contributions (APCs).
You can buy up to £9,158 of extra guaranteed LGPS pension directly within the scheme. Your pension fund administrator can give you a quote, or you can use an online calculator.
Option 2: Shared Cost AVC, the one that deserves its own spotlight.
A Shared Cost AVC is a separate retirement savings pot that sits alongside your LGPS pension. And the way it works is, frankly, a bit gobsmacking.
Because contributions come out of your salary before Income Tax and National Insurance are applied, the actual cost to your take-home pay is lower, often significantly lower, than the amount going into your pot.
Here's what that looks like for a basic-rate taxpayer:
|
Take it as salary |
Put it in a Shared Cost AVC |
|
|
Gross amount |
£100 |
£100 |
|
What you receive |
£72 in your pocket |
£138.89 into your pot |
That difference is the Income Tax and National Insurance you would have handed to HMRC, now going into your retirement savings instead. Higher-rate taxpayers benefit even more.
Subject to HMRC limits and scheme rules, LGPS members can often take their Shared Cost AVC pot as part of their tax-free lump sum at retirement. No other major public sector pension scheme offers this flexibility. The choice between leaving money in your payslip versus investing it for retirement isn't £72 versus £72. It's £72 versus £138.89.
Capital at risk when investing. The value of investments can go down as well as up.
The Pensions UK report is (rightly so) a wake-up call for the UK workforce. Most workers are drifting towards a retirement that looks very different from the one they're imagining.
If you're in the LGPS, you have a head start. A guaranteed income, a generous employer contribution, inflation protection built in. That's genuinely valuable, and genuinely rare.
But the retirement you want might cost more than the retirement you're currently on course for. The gap between the minimum standard and the comfortable standard is over £30,000 a year for a single person.
A few things worth doing:
Check your annual benefit statement.
Your pension fund sends you one every year. It tells you exactly what you've built up so far. Pull it out. Look at the projected figures. Compare them to the standards table above. Know where you stand and if there’s a gap you’d like to close.
Check your State Pension forecast.
It's separate from the LGPS, and it matters. Log in at Check your State Pension and make sure your National Insurance record is on track.
Think about housing.
The standards don't include it. If you'll still be paying rent or a mortgage in retirement, factor that in.
The retirement you've always wanted is probably more achievable than you think. You've got a brilliant pension foundation. Now let's build on it.
Questions about your LGPS benefits? Contact your regional pension fund administrator, or speak to your HR or payroll team. For personalised retirement planning advice, speak to a regulated independent financial adviser and for Shared Cost AVC guidance, speak to the My Money Matters team.