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A third of Generation Xers are not saving enough for retirement

You might know that ‘Generation X’ refers to those aged 41 and 56.


A new report* by the International Longevity Centre and Standard Life indicates that only 7% of Gen Xers are saving enough for even a moderate lifestyle in their retirement, which they define as providing ‘some level of freedom and resilience to shocks’.

As for the rest of that age group, 60% of those saving into their pensions are not saving enough for financial security later in life, and 59% of those say they will lack any other income source when they retire.

Perhaps most alarmingly of all, 17% are unaware of how much they are contributing – the knowledge that would be the essential starting point for knowing what to expect in retirement, and knowing what needs to change now, if improvements are needed in good time to make some difference.

Auto-enrolment

The introduction of auto-enrolment into a workplace pension was introduced in 2012, and has been a great success in getting people saving. By placing people automatically into a scheme, with the option to leave it, auto-enrolment turned people’s ‘pensions apathy’ around, in their favour, as now most decided to keep saving for their pension.

The current contribution for auto-enrolled members is 8% of salary, which includes at least 3% from your employer.

However, many believe that, while this is better than nothing, it is not enough. Scottish Widows, for example, are outspoken in their view that we need to be saving at least 12% to achieve a reasonable outcome.

In fact, a person enrolling into a pension scheme today would have to contribute just that – 12% - to achieve the same returns as someone who was paying 8% a decade ago.

Another disadvantage for Generation X is that many entered the job market too late to have access to the very generous final salary pension schemes, which proved expensive for employers and therefore have been gradually closed to new members over the last two decades.

Over two-fifths (44%) also have gaps of at least 10 years in their pension contributions, and women are particularly vulnerable to this, due to ‘the motherhood penalty’ – a long career break taken to raise a young family.

Even if mums do then return to the workplace, it is often to part-time work, with the corresponding impact on their ability to save for retirement that entails.

The consequences for Generation X could be stark

The phrase ‘trapped in the workplace’ has been coined to describe the situation of those who arrive in their mid-60s only to find that, financially speaking, they are simply not in a position to retire.

Experts believe we will see an emerging group who, having planned to retire on schedule, will be forced to work well into their 70s before they can do so.

If you are a member of Generation X, could now would be the time to speak to your financial advisor to discuss upping your pensions contributions?

Just give us a ring.

 

*ILC Report “Slipping Between the Cracks” July 2021

A new report* by the International Longevity Centre and Standard Life indicates that only 7% of Gen Xers are saving enough for even a moderate lifestyle in their retirement, which they define as providing ‘some level of freedom and resilience to shocks’.
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