2.6 million Gen Xers’ retirement savings disrupted by COVID-19 pandemic and many more at risk of facing financial hardship in retirement
2.6 million Gen Xers’ retirement savings disrupted by COVID-19 pandemic and many more at risk of facing financial hardship in retirement, new ILC report finds
- At least 1 in 3, or nearly 4.3 million Gen Xers, are set to reach retirement with minimal retirement incomes, new research finds.
- COVID-19 has left 1.6 million Gen Xers on furlough, around 1.3 million with reduced hours and just over half a million made redundant.
- Over half (57%) of Gen Xers who are yet to retire want to save more for retirement but are struggling to do so, with 7.9 million (61%) unable to afford to save more or prioritising paying off debts and almost 3.8 million (29%) overwhelmed with other pressures and priorities.
Our latest research, supported by Phoenix Group, finds that 1 in 3 Gen Xers will face a grave reality of retiring without adequate levels of pension provision, if policymakers fail to respond urgently to support this generation set to retire over the next 10 – 30 years.
The research unveils that among Generation X (those born between 1965 – 1980):
- At least 1 in 3 are at risk of spending their later years with minimal retirement income, with just over 2.3 million people yet to retire expecting to rely predominantly on the state pension – equating to just over £9000 a year.
- 50% 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.
- At the same time, 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.
The research, drawing on a nationally representative survey and panel discussions across the UK, finds that most Gen Xers – also referred to as the ‘forgotten generation’ –want to save more, but face significant barriers to saving:
- 61% can’t afford to save more or are prioritising paying off debt, and 29% say they have too many other pressures and priorities to think about, when asked the 4 main factors that make it hard to save for retirement.
- 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.
- 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, 2.6 million people have had their savings disrupted by the pandemic.
15 years on from the publication of the Pension Commission’s Second Report, we are 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 argued:
“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.”
Lord Hutton, Peer and former Secretary of State for Work and Pensions, commented:
“The Turner Report helped to establish a national consensus around the need to encourage greater retirement saving. This report from the ILC has highlighted the fact that many people still find it very hard to save sufficient money to cover their retirement needs.”
“We will need a very significant focus on Generation X as we consolidate the enormous progress we gave made since 2005 in establishing an effective and inclusive pension savings policy. “
Jenny Holt, Managing Director, Customer Savings & Investments, Phoenix Group said:
“This is a clear call to action to help improve the future of Gen Xers. One in five of the UK population are Gen Xers and millions will face problems because of inadequate retirement savings if actions aren’t taken to help them understand their current position and the options available to them.”
“This is the generation that entered the job market too late to benefit from final salary pensions, yet too early to benefit from schemes such as auto-enrolment. The combination means that without appropriate intervention many Gen Xers are expected to face very significant challenges in retirement, and even pensioner poverty.”
“Policymakers, industry and business need to work together to help this generation, including ensuring they have access to the right support – whether that’s guidance or advice – when they need it. With the Covid-19 impact putting additional strain on finances this need is even more urgent.”
The findings are ILC calculations based on nationally representative YouGov survey responses of 6035 UK adults aged 40-55 (collected online between 13 – 24 November). All references and methods are available in the report.
The final report, including more detail on which sub-groups of Gen Xers are specifically at risk and how policy interventions can target these, will be launched at a virtual event on Tuesday 2 March. Register here.