Public sector households (58 per cent) are more likely than private sector households (42 per cent) to be on track for an adequate retirement income, research from Hargreaves Lansdown has found, warning that "there's still a long way to go" to close this gap. 

Hargreaves Lansdown head of workplace saving analysis, Clare Stinton, explained that this gap comes largely from the prevalence of final salary pension schemes in the public sector, which she said can “play an enormous role” in helping people to build a resilient retirement income.

However, Stinton said that while such schemes still exist in parts of the private sector, they have become “vanishingly rare” in recent years.

Although auto-enrolment has brought more people into pensions, Stinton argued that it is clear “more needs to be done to boost contribution rates”.

But rather than a rise in minimum contribution rates across the board, she suggested that "we could, for instance, see more targeted measures – for instance, encouraging employers to increase their own contributions for those employees able to boost theirs".

“We may also see more employers look to boost their employee benefits packages with wider savings products," she said. 

In addition to this, she said that small steps, such as nudging up pension contributions, maximising what’s on offer from an employer, or delaying retirement, can also “shift the dial significantly”.

She also emphasised the importance of looking beyond pensions when assessing retirement resilience and instead considering people’s wealth in its entirety, noting that when wider assets such as savings and investments are considered, people’s resilience “rockets”.

Public sector workers still “lead the pack”, with nearly two-thirds (65 per cent) on track for an adequate retirement once non-pension wealth is considered.

Adequacy in retirement also improved among private sector workers when broader savings are considered: with employees in large companies seeing a rise from 41 per cent to 51 per cent, while those in small and medium enterprises (SMEs) saw an increase from 42 per cent to 51 per cent (excluding emergency cash).

This was also true for the self-employed, as Hargreaves Lansdown found that while self-employed workers “continue to struggle”, with 36 per cent on track with their retirement saving, nearly half (47 per cent) are on track when taking wider assets into account.

“Irregular income can drive this group to prioritise flexibility over traditional pension contributions, leading many to invest outside of pensions altogether,” she said, pointing out that many self-employed workers are also "locked out” of auto-enrolment.

Given this, Stinton argued that the lifetime individual savings account (LISA) could be of “huge benefit” for self-employed workers, particularly for basic rate taxpayers.

However, Stinton called for reforms to make LISAs “even more effective” by expanding the age eligibility beyond 40 and reducing the exit penalty to 20 per cent, suggesting that these changes would “better reflect the realities of self-employed work patterns and support greater long-term financial security”.

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