Millions of us are not saving enough for retirement but one age group is set to suffer most
There are fears not enough people are saving for retirement (Image: PA)
The UK faces a pensions crisis – and one generation in particular is set to suffer most. So-called Generation X has failed to plan for retirement, according to the Pensions Commission, an official inquiry set up by the Government.
This generation, of people born between 1965-80, is particularly guilty of “undersaving” and is most likely to suffer a miserable retirement as a result. More than one in seven of this age group will have an income in old age too low to meet their basic needs, or what the commission calls a “minimum retirement living standard”. There are 15million working-age people who are currently not putting enough into their pensions, the commission warned in a new report.
But it said: “Generation X (born 1965-80) are projected to have the worst outcomes.”
Most of this generation missed out on the gold-plated “final salary” pensions received by many of the “baby boomer” generation that came before them. But they were also slow to get into the habit of saving into the “defined contribution” pensions that are now standard in the private sector.
Younger generations are in the habit of saving because of a policy called automatic enrolment, which came into force in 2012 and requires employers to offer pension schemes.
And even if middle-aged workers increase their pension contributions now, they may have left it too late, according to the Pensions Commission.
It warned in the report: “Given Generation X are currently in their 40s and 50s, efforts to address levels of inadequate defined contribution savings in the coming years will have less impact on them than subsequent generations.”
Steve Webb, partner at pension consultants Lane Clark and Peacock, said: “For many decades, the best retirement prospects have been for those who were members of high-quality final salary type pension schemes.
“But most of those schemes have closed, and we are currently seeing the last generation of retirees getting meaningful final salary pensions from the private sector.
“The new pensions being built up through automatic enrolment will be valuable in due course, but take decades to build up.
“As a result, Gen X are caught in the middle, having largely missed out on final salary pensions but not yet built up significant new-style ‘pot of money’ pension wealth.
“It is as if the final salary tide has gone out, but the cavalry of new workplace pensions is barely visible on the horizon.”
According to the Pensions Commission, 15% of “Generation X” will fail to meet the minimum retirement living standard, which is defined as being able to meet their basic needs and pay for some minor luxuries such as a meal out once a month, and a self-catering holiday in the UK.
This compares to 10% of Generation Z, born between 1997 and 2012, and 11% of Millennials, born between 1981 and 1996.
The report looked at the scale of the problem, and the Pensions Commission will publish future studies setting out proposals for the future of pensions.