Truss must not ignore Gen X pension crisis

Phil Brown says a 'stark generational divide' is clear

clock • 2 min read
Truss must not ignore Gen X pension crisis

Crisis is a word that is bandied around all too often, but a crisis is what members of Generation X are likely to face when it comes to retirement.

With a spiralling cost-of-living crisis and a predicted recession, it may seem like yet another problem for incoming prime minister Liz Truss to add to her growing in-tray, but the fact that millions of hard-working people aren't saving enough to live on once they've finished working, isn't an issue that should be kicked into the long grass.

With support from The Policy Institute (PPI), our new analysis of the ONS Wealth and Assets Survey, shows that the majority of people across the UK will miss the target replacement rates outlined by the Pensions Commission in 2004 to benchmark savings adequacy. The commission - set up to review UK private pensions and long-term savings - outlined that people in the UK would need a retirement income equivalent to two thirds of their working income. But six in 10 (61%) of households and almost two thirds of individuals (63%) are set to miss that target.

Look more closely at the figures and a stark generational divide is clear, with Generation X, those born between 1965 and 1980, at risk of falling down a savings gap.

More than two thirds (68%) of ‘Generation X' workers, born between 1965 and 1980, and almost eight in 10 (76%) ‘Millennials', born between 1981 and 1996, aren't saving enough. That's compared with just four in 10 (41%) ‘Baby Boomers'; those born between 1946 and 1964.

While Millennials largely have time to make up the shortfall, when Generation X retires in significant numbers, the country will face a retirement crisis. People will not be able to carry on with anything like their current standard of living.

As auto-enrolment nears its second decade, it is fair to say that the policy has been a huge success and has achieved what was envisaged; More than ten million more people across the UK are saving towards their future. But while saving something is better than saving nothing, it's clear that auto-enrolment isn't currently providing millions of savers with what they need.

This is not a problem that can be solved during the current cost of living crisis. I completely understand that saving for the future will be the last thing on many people's minds, with so many people struggling to pay their spiralling bills, but this issue is not something that should be ignored.

The industry, employers, trade unions and cross-party politicians need to come together to review auto-enrolment and the purpose of UK pension saving, to gain consensus on the challenges ahead and set clear objectives for the pensions system as a whole.

We would be in a much worse position if it were not for automatic enrolment, which has dramatically increased the number of people saving for retirement over the past decade, but now it's time to ensure it reaches its full potential. The only way we can do that is by working together.

Phil Brown is director of policy at B&CE

More on Pensions

IHT pensions changes expected to drive 'strong interest' in annuities

IHT pensions changes expected to drive 'strong interest' in annuities

Though ‘ambiguity’ persists on annuities treatment, retirement planning expert says

Jen Frost
clock 04 November 2024 • 3 min read
Budget end to overseas pensions 'loophole' could cause 'chaos'

Budget end to overseas pensions 'loophole' could cause 'chaos'

OTC applies to more transfers under changes

Jen Frost
clock 31 October 2024 • 2 min read
Pensions tax-free cash untouched – but what about those who acted pre-Budget?

Pensions tax-free cash untouched – but what about those who acted pre-Budget?

No lump sum change should be ‘welcomed’ but damage cannot be undone

Isabel Baxter
clock 31 October 2024 • 5 min read

In-depth

Your Autumn Budget briefing: Tax and pensions changes Labour could have in store

Your Autumn Budget briefing: Tax and pensions changes Labour could have in store

Budget comes as prime minister says country 'embrace the harsh light of fiscal reality'

Jen Frost
clock 29 October 2024 • 22 min read
In view: Plotting PFS change

In view: Plotting PFS change

From first operating loss since 2008 to sponsorship, board and revenue changes

Jen Frost
clock 17 October 2024 • 6 min read
Inside look: Fintel's ambitious 'Bloomberg of retail' plans

Inside look: Fintel's ambitious 'Bloomberg of retail' plans

Integration in focus as group pushes pause on deals

Sahar Nazir
clock 30 September 2024 • 6 min read