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A new report warns that many people born between 1965 and 1980 face hardship in retirement if urgent action is not taken, with Covid-19 having made it harder for them to save or having forced them to eat into their savings.
A third of Generation Xers will face a pension timebomb if policymakers fail to take action, with Covid-19 having made it harder to save, according to new research.
The study by the International Longevity Centre UK (ILC), supported by Phoenix Group, shows that a third of Generation X people [those born between 1965 and 1980] are at risk of spending their later years with minimal retirement income, with just over 2.3 million expecting to rely predominantly on the state pension. That stands at just over £9,000 a year.
It also finds that half of Gen Xers yet to retire (6.5 million) are worried they won’t be able to live the lifestyle they want and 6.2 million (48%) think they’ll be worse off than their parents in retirement. It warns that 11% of Gen Xers (1.4 million people) may be unaware of their financial futures, putting them at risk of “sleepwalking into financial hardship in retirement”.
Most want to save more, but the research says they face significant barriers to saving, including 61% who can’t afford to save more or are prioritising paying off debt and 29% who say they have too many other pressures and priorities to think about. It finds Gen Xers set to retire over the next 10 – 30 years claim that insecure incomes and outgoings (19%), a lack of motivation (13%) and a lack of information (10%) are also key barriers.
What’s more, Covid-19 is making it harder for this generation to save, with the pandemic having left nearly 1.6 million Gen Xers yet to retire furloughed, 1.3 million with reduced working hours and just over half a million made redundant. 12% of Gen Xers yet to retire are now spending part of their savings and 13% say they are saving less as a result of Covid-19. As such, the study estimates that 2.6 million people have had their savings disrupted by the pandemic.
The ILC is calling on Government, industry and employers to urgently work together to support this generation and avert millions from struggling in retirement in the decades to come.
ILC Director David Sinclair said: “From a retirement income perspective, many Gen Xers are, frankly, screwed. Too many are sleepwalking into a retirement where they won’t have an adequate income to meet their aspirations.”
“And their situation has been made worse by Covid-19. They haven’t been able to save enough. Many Gen Xers aren’t going to benefit from final salary pensions. And there is a sense of hopelessness about how they might turn things around.”
“There is some good news, however. Some people really do want to save more. They just don’t see how they can do it. Government and industry must find a way to lever this willingness and ensure public policy better addresses the barriers too many are facing to saving.”