A report by the
The landmark report focuses on three areas which impact on pension and retirement plans: labour working patterns, government policy, and economic factors; considering the impact of each on Gen X and comparing that with the experience of Baby Boomers and the likely experience of Millennials.
Key statistics from the 'Generation VeXed solving the retirement puzzle' report include: * 55% - the proportion of Gen X in routine or manual jobs at high-risk of not achieving a moderate level of income in retirement
* 27% - the percentage of Gen X in rented accommodation, which means that in retirement a significant proportion of peoples' income will be going on property costs
Commenting on the launch of the report,
"We need to recognise that some of Gen X will not feel in a position to take action and that there is no silver bullet for solving their retirement challenge. However, with the right support, encouragement, and engagement, we can all help to ensure they don't just sleepwalk into a grey and grim retirement when there is more that could be done. It will take a collaborative effort on the part of government, regulators and our industry to ensure more individuals have an adequate, sustainable and flexible retirement income in the future. Consumer initiatives like the Pensions Dashboard, which we fully support, are an example of how we can make it easier for everyone to see their full retirement picture and know when to take action if they can."
On working patterns and labour market trends, the report finds that Gen X individuals in routine, manual or self-employed work are at higher risk of not achieving a suitable retirement income due to shifting working patterns. Individuals now average 11 different employers during their working lifetime, with the rise of part-time work a key contributor to this - roles which are associated with lower earnings and can impact on pension contributions.
This disproportionally affects Gen X women, who face higher risks of not achieving an adequate income in retirement than men due to lower average earnings and a subsequent higher contribution ratio (potentially up to 47% of income) which can be out of reach for many individuals and vulnerable families.
The changing economic circumstances from generation-to-generation also impacts future retirement plans and living standards. The combination of reduced wage growth, high living expenses, and the changing availability of credit means Gen X are more likely to reach retirement with some form of mortgage debt. This is heightened when you factor in rising house prices - now 4 times more expensive than in 1990 with 27% of Gen X renting accommodation compared to 19% of Baby Boomers. Recent government and market led policy has also caused a shift in saving and retirement habits. The number of Defined Benefit (DB) savers in the private sector has fallen from 8 million in 1967 to just 1.1 million in 2019. As this DB deceleration occurs, an increased reliance on Defined Contribution (DC) pensions will grant individuals more flexibility in pension management, but offer reduced longterm rewards, with lower annuity payments, making them far less sustainable for the guaranteed high standard of living many individuals are expecting.
Younger generations will also receive less income from the state pension in future years as a result of the removal of the right to accrue entitlement to an earnings-related State Pension. The report found that 46% of Gen X will receive a state pension of around
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* Changes in policy and economic circumstances mean that 'Gen X' will struggle to achieve a similar standard of lifestyle as 'Baby Boomers' in retirement
* Shifts in working patterns will hinder people saving for retirement, with Gen X unable to fully benefit from long-term auto-enrolment schemes
* Gen X women are more at risk of a poor retirement due to historic pay disparity
* A collaborative effort from Government, industry and regulators is needed to ensure individuals can have an adequate, sustainable and flexible retirement income