Millions of individuals, particularly those in Generation X, are under-saving for retirement, with a significant portion unable to envision their post-work life, according to new research. A survey found that approximately half of those aged 45-60 did not begin seriously considering their pensions until well into their 40s, feeling they left retirement planning too late.
This demographic, often referred to as 'Gen X,' is identified as the most likely to be under-saving for old age. According to Maike Currie, vice president for personal finance at PensionBee, this generation has faced unique financial pressures. "They came of age as final salary pensions were disappearing, meanwhile auto-enrolment arrived later in their careers," Currie stated. "They have weathered repeated economic shocks while many have found themselves sandwiched between supporting children and caring for ageing parents. It's no surprise their own retirement has sometimes slipped down the priority list."
The research suggests that retirement remains a distant or difficult-to-picture prospect for people aged 45-60. Among those who felt they had left retirement planning too late, 40% cited financial inability to focus on pensions sooner, and 18% were unsure where to begin.
Shifting Pension Landscape
Historically, final salary pensions provided a guaranteed income for life. However, these have been largely phased out in the private sector. The introduction of auto-enrolment in 2012 mandated minimum contributions from employers, employees, and the government. While some employers offer more generous schemes, the overall landscape has shifted significantly from previous pension structures.
Even affluent members of Generation X, with substantial assets, express the least confidence regarding retirement. A recent survey by Rathbones indicated that 29% of wealthy Gen X individuals lack a clear understanding of how to convert pensions and investments into regular retirement income. Furthermore, 28% do not believe their retirement income will be sufficient to maintain their desired standard of living.
The Retirement Gap
PensionBee highlights a warning from the government's Pensions Commission that 15 million people are under-saving for retirement, with Generation X facing a particularly acute challenge. An estimated 46% in this age group are projected to fall short of the income needed to maintain their current standard of living in retirement, the highest proportion of any generation. For those with defined contribution pensions, which replace final salary schemes, 32% have less than £50,000 saved.
"You can't plan for a future you can't picture," Currie noted. "Gen X are getting closer to retirement than any other working generation, yet for many it still feels abstract. When you can't see what you're aiming for, it's much harder to work out what you need to save to get there." She added that this generation risks being the first to retire worse off than the preceding one, calling it a "wake-up call for the government and policymakers" and advocating for "tools, support and flexibility to catch up while there is still time."