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Why many Gen Xers struggle to save more for retirement

Donna Walsh | June 23, 2021

Time to read: 3 minutes

Donna Walsh,

Some people born between 1965 and 1980 – Generation X (Gen Xers) – risk reaching retirement with inadequate incomes.

One in three (30%) Gen Xers are at risk of their pension plan providing a minimum or lower than minimum standard of living in retirement. And 20% of Gen Xers who expect their lifestyles to continue or improve upon retirement aren’t even saving nearly enough for a minimum income.[i]

These findings were part of the report, Slipping between the cracks? Retirement income prospects for Generation X – produced by the International Longevity Centre, with the support of Phoenix Group.[ii]

More than half (57%) of Gen Xers would like to save more for retirement but struggle to do so. The barriers are broadly affordability, insecurity of income and/or outgoings, motivation, and lack of information (see Figure 1).

Figure 1: Affordability and debts are the main reasons cited for not saving more for retirement

*Respondents were able to choose up to four options. *All figures in the graph are denoted as proportions of all Gen Xers who expect to retire (93% of all Gen Xers). Source: YouGov survey 13–24 November 2020.

Let’s look at these main factors in more detail.

Affordability and debt

Half of all Gen Xers cited affordability as one of the four main factors that made it difficult to save for retirement. Key factors underlying this affordability constraint include:

  1. Obstacles affecting their ability to work and/or earn
  2. Expenses including housing costs, child care costs and so on
  3. Financial costs associated with caring responsibilities

Poor health or caring responsibilities that prohibit working are key reasons why Gen Xers cannot save more for their retirement. Failing to address these barriers has an impact on Gen X – limiting their ability to save and cutting off one of their routes to supplementing retirement income.

More than a fifth (21%) of Gen Xers (who said they can’t afford to save more) reported barriers to working either full- or part-time. These barriers included health problems, care responsibilities for an adult, and other reasons that could include age discrimination, redundancy and child-care responsibilities.

Many Gen Xers (42%) are a parent or guardian to a child under 18; full-time work is far less prevalent among female compared to male Gen Xer parents/guardians and Gen Xers overall (39% vs. 79% vs. 58%).

Meanwhile, 12% of Gen Xers provide informal care to an adult at least once a week: this group is less likely to work full-time than Gen Xers overall (43% vs. 58%).

Affordability is not the only barrier to saving, however. For instance, homeowners without a mortgage were only slightly more likely to pay a large proportion (13+%) of their salary into a pension plan than homeowners with a mortgage (27% vs. 23%).This suggests that “savings inertia” is also a significant barrier.

In fact, 45% of those contributing 5% (the minimum auto enrolment rate) or less into a pension plan didn’t cite affordability as a barrier to saving more.

Competing priorities

Nearly a third (29%) of Gen Xers said they are too overwhelmed and distracted with other pressures and priorities to think about retirement. More than a third (38%) of Gen Xers who live with children under 18 fall into this group, compared with 25% without younger children. This rises to 41% of those also caring for an adult: around 4% of Gen Xers fall into this category.

Lack of information

More than a third (39%) of Gen Xers – around 5.4 million people – don’t feel confident about planning for retirement on their own. Most Gen Xers say they’d value more information about planning for retirement – especially guidance: 60% said they would find free guidance and/or paid-for financial advice useful.

 

This article is part of a series of articles examining the pension savings challenges faced by Gen Xers in the UK. It is based on an independent ILC report, produced with the support of Phoenix Group, an ILC partner.

Click here to read the full report.

The information here is based on our understanding in June 2021 and shouldn’t be taken as financial advice.

Investments can go down as well as up and may be worth less than was paid in.

 

 

[i] Minimum standard of living: This is enough to cover basic living costs but not enough for individuals to have financial security and the flexibility to do many of the things they might want to do. The contribution level estimated to achieve this is 8% of average full-time earnings (member plus employer contributions).

We use terms to describe different levels of retirement income that were coined by the Institute and Faculty of Actuaries (IFoA), building on research by the Pensions and Lifetime Savings Association (PLSA).

[ii] The report draws on analysis of a nationally representative YouGov survey of 6,035 Gen Xers, which was carried out over the period 13–24 November 2020. This analysis was supplemented with panel discussions and a qualitative survey with a smaller number of Gen Xers, which explored their attitudes and perspectives. Previously published data and literature was also drawn upon.

Donna Walsh

Head of Proposition Deployment

Donna has responsibility for the deployment of Standard Life’s customer and workplace propositions.  She has been heavily involved in our Workplace developments over the past 10 years and is passionate about improving the experience for ou […]

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Helping members understand more about their pension and options at retirement.

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Donna Walsh

Head of Proposition Deployment

Donna has responsibility for the deployment of Standard Life’s customer and workplace propositions.  She has been heavily involved in our Workplace developments over the past 10 years and is passionate about improving the experience for ou […]

Read Donna's blogs
Donna Walsh,

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