Cross-Atlantic Retirement Readiness: What the U.S. Can Learn from the U.K.

Early withdrawals & their impact in the U.S.

Americans are facing increasing financial strain, and their retirement savings are often the first casualty. A 2025 survey by the Transamerica Center for Retirement Studies and a recent Principal study found that:

• 37% of workers have withdrawn funds from their retirement accounts to cover immediate financial needs.

• 39% have reduced their contributions.

• 20% have stopped saving altogether.

This pattern is deeply concerning and follows the overall retirement savings landscape in the U.S. According to the Survey of Consumer Finances (SCF), nearly half of all American households have no retirement savings at all. Perhaps even more startling is that the closer you get to retirement, your chances of having a retirement account do not improve.

The Government Accountability Office (GAO) reports that nearly half of American households aged 55 and older have no retirement savings — and among those who do, the median savings is just $104,000 for those aged 55-64. When converted into monthly income, this amount falls far short of what’s needed to sustain a comfortable retirement.

When workers cash out their retirement accounts early, they often don’t reinvest later. Instead, they face tax penalties, lose out on decades of compound growth, and ultimately find themselves at risk of financial hardship in old age.

Manual processes

U.S. workers saving for retirement navigate a maze of outdated and manual processes. While the system is not fundamentally broken, it needs to be modernized.

• Paper processes: Rolling over old 401(k)s can be a long road. An overreliance on paper processing and snail mail creates unnecessary bottlenecks that may add weeks — if not months — to retirement account transfer times.
• Outdated storage: A widely reported story highlighted the government’s use of a limestone mine as a storage and processing facility for over 10,000 federal workers’ retirements each month.
• Lost Checks: In some cases, workers have reported losing five-, if not six-figure, checks in the mail.

Retirement savings in the U.K.: A different approach

In contrast, the U.K. has policies in place that significantly reduce early withdrawals and promote long-term savings. Some key differences include:

• Restricted access: U.K. residents cannot access their pension funds before age 55 without incurring steep tax penalties — up to 55% in some cases. The only exceptions are serious illness with a life expectancy of less than 12 months and severe ill health with the inability to work.
• Widespread participation: 83% of U.K. adults have a retirement savings plan, compared to less than 50% of American households. This is due to strict automatic enrollment laws, which opt employees into saving plans and mandate employer contributions.
• Pro-consumer practices: U.K. policies create a culture in which pensions are viewed as important and untouchable until retirement, reinforcing the habit of long-term saving. This includes the abolishment of high fees for managing former employee accounts.

In contrast, covert fees, manual processes, and limited regulations surrounding everything from early withdrawals to contributions create a disadvantageous landscape for American consumers. Additionally, U.S. federal law does not mandate that private employers provide employees with a retirement plan.

Lessons for the U.S.

While the U.S. and U.K. have different economic and regulatory landscapes, there are clear opportunities for the U.S. to improve retirement readiness by adopting some best practices from across the pond.

1. Strengthen withdrawal penalties: Rolling back the scenarios under which withdrawals are allowed could help curb the current cycle of cashing out, which can leave people underprepared for retirement.
2. Expand automatic enrollment: Encouraging broader implementation of automatic enrollment in workplace retirement plans would drive up participation rates and encourage broader use of retirement savings accounts.
3. Introducing consumer-friendly practices: The elimination of vesting requirements potentially helps Americans save more in the long term. If you leave a job before your retirement savings have vested, you could lose access to money you were counting on.

It is critical we address and solve these challenges for everyday Americans. Retirement security should be accessible to everyone, not just the wealthy or financially savvy. By taking a more structured approach — one that prioritizes preservation and growth — we can help more people retire with confidence. The U.S. retirement system isn’t broken, but it does require bold reforms. It’s time to rethink our approach to saving for the future.

Romi Savova is the founder and CEO of PensionBee, a FinTech company transforming how individuals consolidate and manage their retirement savings. Through an intuitive mobile app, PensionBee empowers users to take control of their financial futures with simplicity and transparency.

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