Retirement should be a time of peace, stability, and financial security. Yet for millions of people in the United Kingdom, the reality is turning out quite different. According to the latest data, UK retirees could be collectively losing out on more than £70 billion in retirement income due to a combination of poor planning, lack of awareness, and avoidable errors when managing pensions.
This October 2025 update reveals what these mistakes are, why they matter, and—most importantly—what you can do to protect yourself from falling into the same traps.
Why pensions matter more than ever
With the cost of living still high and inflation slowly stabilising, pensions have become the primary lifeline for millions of older Britons. The UK State Pension currently provides just over £11,500 per year for those on the full new State Pension, but that figure is barely enough to cover rising bills, rent or mortgage payments, and everyday expenses.
That’s why private pensions, workplace pensions, and savings are now more critical than ever. Unfortunately, many retirees are missing out on thousands of pounds each year because they fail to understand how the system works—or they make decisions without seeking proper advice.
The scale of the pension gap
A recent analysis suggests that more than 3 in 5 retirees in the UK may be receiving less than their entitled pension income. Collectively, this equates to more than £70 billion left unclaimed, uncollected, or poorly managed. For an individual, this could mean losing out on anywhere from £5,000 to £50,000 over the course of retirement.
The good news is that many of these mistakes are avoidable. By understanding where people go wrong, you can take steps today to secure a stronger financial future.
Mistake 1: Not claiming all available pension pots
One of the biggest issues is that people simply forget about old workplace pensions. With today’s workforce changing jobs more frequently, the average UK worker could have 10 or more pension pots spread across different employers.
If you’ve moved jobs several times, there’s a real chance you’ve left behind money that should be supporting your retirement. The government’s Pension Tracing Service can help you track down forgotten pots, but thousands of people never check, leaving billions untouched.
Mistake 2: Relying only on the State Pension
Many retirees assume that the State Pension will be enough to live on. In reality, it rarely covers even the basics. If you don’t have other savings, investments, or a workplace pension, you may face a serious income shortfall.
Planning ahead by contributing to workplace pensions, taking advantage of employer matches, or opening a personal pension can make a massive difference. Yet many people only realise this after they’ve retired—when it’s too late.
Mistake 3: Not checking your National Insurance record
To qualify for the full new State Pension, you need at least 35 years of National Insurance contributions. But many retirees don’t check their records until after they’ve started claiming, only to find gaps that reduce their weekly payments.
You can often fill these gaps by buying back missing contributions, sometimes for just a few hundred pounds. Over time, this could boost your pension income by thousands.
Mistake 4: Poor tax planning in retirement
Another costly mistake is failing to plan for how pensions are taxed. Many people withdraw lump sums without realising that they could be pushed into a higher tax bracket, losing thousands to HMRC unnecessarily.
By carefully managing withdrawals, using tax allowances, and spreading income across tax years, retirees could significantly reduce their tax bills. Professional financial advice can be especially valuable here.
Mistake 5: Taking pensions too early
It can be tempting to access pension savings as soon as you turn 55 (rising to 57 in 2028). But drawing down too much too soon is one of the most expensive errors retirees make.
The earlier you withdraw, the less your money has time to grow. Many people find themselves struggling in later retirement because they used up their savings too quickly. A sustainable withdrawal strategy is essential.
Mistake 6: Not shopping around for annuities
For those choosing to convert pension savings into an annuity, failing to shop around is a serious blunder. Rates can vary widely, and health conditions or lifestyle factors can mean you’re entitled to a higher income than standard rates offer.
Yet research shows that the majority of people simply accept the first offer from their provider—potentially losing tens of thousands of pounds over their lifetime.
Mistake 7: Ignoring inflation’s long-term impact
Inflation is often underestimated. While prices have surged in recent years, many retirees still underestimate how much living costs can erode their income over 20 or 30 years of retirement.
If your pension isn’t linked to inflation, its real value will shrink dramatically over time. Building in inflation protection, whether through index-linked annuities or investment strategies, is key.
Mistake 8: Failing to seek advice
Retirement planning is complex, and yet many people avoid seeking professional advice due to cost concerns. However, the money saved (or gained) from proper guidance usually outweighs the upfront fee.
A good adviser can help with tax planning, investment strategy, and pension withdrawals, ensuring your money lasts as long as possible.
How to avoid these mistakes
Avoiding the £70 billion pension trap isn’t about making one perfect decision—it’s about taking a series of small but crucial steps:
- Check your State Pension forecast on the government’s website.
- Track down old workplace pensions using the Pension Tracing Service.
- Fill National Insurance gaps where possible.
- Plan withdrawals carefully to avoid unnecessary tax bills.
- Shop around for annuities if considering one.
- Review your pension regularly, especially after major life changes.
- Consider speaking with a regulated adviser to build a sustainable plan.
The role of government and policy changes
The UK government has also recognised the pension crisis. Automatic enrolment into workplace pensions has been a positive step, but contribution levels remain low. There’s ongoing debate about raising minimum contributions and offering more support for savers.
Policy changes in 2025 may also affect how pensions are taxed, how State Pension age increases are implemented, and what protections are available against inflation. Staying informed is crucial to ensure you don’t miss out.
Why October 2025 is a wake-up call
This October serves as a reminder: retirement mistakes are costing UK households dearly. The £70 billion figure is not just a statistic—it represents real people struggling to pay bills, cutting back on essentials, or facing stress in what should be their golden years.
By taking action now, even small steps can make a meaningful difference. Whether you’re five years from retirement or already drawing your pension, it’s never too late to improve your financial situation.
Final thoughts
Retirement doesn’t have to be uncertain or financially stressful. Most of the £70 billion being lost is the result of avoidable mistakes, from forgotten pensions to poor tax planning.
By learning from others’ errors, staying proactive, and seeking advice when needed, you can protect yourself and ensure your retirement years are truly secure.
Your pension is not just about money—it’s about peace of mind. Don’t let avoidable mistakes reduce the comfort and dignity you deserve in later life.