Half of UK pension pots cashed in on holidays and cars

Half of all UK pension pots are being cashed in full and often spent on cars, holidays and home renovations, the Pensions Commission has found.

Around 3 in 10 private pension pots are accessed at the earliest possible opportunity, half are taken out in full, and nearly half of those withdrawals go on large one-off expenses, according to the Commission’s interim report published on Tuesday (19 May).

The findings point to a system that has succeeded in getting people saving but is failing to convert those savings into sustainable retirement income.

The report sets out a wider undersaving crisis. There are 15 million people currently undersaving for retirement, a figure that could reach 19 million without action, leaving large groups facing a sharp drop in income at the point they stop work.

Low and middle earners are most at risk, with around half saving only at the minimum Automatic Enrolment levels and little else to fall back on.

The Commission also found that 45% of working-age adults, around 18 million people, are not saving into a pension at all, despite nearly half of them being in work. Where employers contribute above the statutory minimum, the report said the gains are largely captured by higher earners.

The self-employed gap is starker still. Just 4%, or one in 25, of wholly self-employed workers are saving for retirement, with the rate falling further among younger self-employed people.

The Commission was set up by the Government in July 2025 to address a savings challenge that has been building for decades. It follows the 2002 to 2006 Turner Commission, which built the political consensus behind Automatic Enrolment. That reform lifted the share of eligible employees saving into a workplace pension from 55% in 2012 to 89% today.

“Over the past two decades since the Turner Commission there is no doubt pensions reform can be described as a success. Yet the second Pensions Commission is looking forward and seeing many people not saving enough and millions not saving at all,” said Baroness Jeannie Drake, Pensions Commissioner.

“This demands a renewed national settlement on pensions,” she added. She said the final report would set out how to secure adequate income in later life and a pension system fit for decades to come.

“Britain has got back into the pension saving habit, but the job is only half done with tomorrow’s pensioners still on track to be poorer than today’s,” said Pensions Minister Torsten Bell. The Government has ruled out any changes to Automatic Enrolment contributions this Parliament.

A warning but not a diagnosis

Wealth manager Quilter said the report should be treated as a warning rather than another diagnosis. The firm’s Head of Retirement Policy, Jon Greer, said automatic enrolment had solved the participation problem but exposed a deeper one.

People feel they are doing the right thing while remaining on course for a retirement that falls short of expectations, he said, and the inertia that works to get people saving works equally against them when it comes to increasing contributions or making active decisions.

Greer added that policy instability around inheritance tax on pensions, salary sacrifice and National Insurance, and the threat of further tax reform at every Budget is undermining confidence in the system.

He also flagged the long-term sustainability of the State Pension and the triple lock as a question policymakers cannot continue to defer.

“Ultimately, the report should be seen as a warning rather than simply an assessment. The direction of travel is clear, and the risks are well understood.

“What matters now is whether the government is willing to act decisively across contribution levels, system design and policy stability. Without that, the gap between what people expect from retirement and what their savings can deliver will continue to widen,” said Greer.

A final report with recommendations will follow in early 2027.

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