Pensions warnings for Generation X

Generation X – those now aged between 39 and 53 – is at greater risk than others of reaching retirement with a pension that is not adequate, sustainable or flexible, according to a new report by the Pensions Policy Institute.

It says that while more millennials, the generation that follows Generation X, face similar overall levels of risk as Generation X due to a greater reduction in the proportion of their income that will come from sustainable sources, the effect of lower earnings in their early careers and the likelihood of indebtedness and not owning their own home in retirement, the Institute says there is less time to mitigate the risks faced by Generation X.

Daniela Silcock, Head of Policy Research at the PPI, said: “The decline in Defined Benefit provision, reductions to the proportion of State Pension people will receive, and an increased likelihood of renting, indebtedness and giving or receiving care in retirement mean members of Generation X are at greater risk of reaching retirement with an income that is not adequate, or sufficiently sustainable or flexible.”

She added that there is still scope, however, for Government, industry and employers to take collective action to help mitigate risks. The Government could, for instance, consider whether benefits could be restructured to ensure that those renting in retirement don’t lose out on means-tested benefits, such as Housing Benefit, reducing both the incentive to save and disposable income in retirement, Silcock added.

The report says industry could also help mitigate the risk of reaching retirement with less income that increases with an inflationary index and pays out until death. It points to products which combine sustainability and flexibility such as a drawdown and annuity hybrid product, could reduce the sustainable retirement income gap.

Silcock added: “Employers could support those who need to provide care, or develop health problems, to continue working and contributing to their pensions by allowing flexible working, encouraging shared parental leave and providing retraining opportunities for workers who need a more sedentary position as they age.

“While individuals may need to take more responsibility for ensuring that they are fully prepared for retirement, Government, industry and employers will each play a critical role in ensuring that the future system provides individuals with all of the tools they need to secure a suitable retirement income.”

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