How employers can support Generation X to save more for retirement
Donna Walsh | June 28, 2021
Time to read: 4 minutes
Many people born between 1965 and 1980 – Generation X (Gen Xers) – want to save more for retirement, but struggle to do so.
Nearly one in three Gen Xers consequently risk reaching retirement with inadequate incomes.[i] And more than half (59%) of this group expect to have no additional (non-pension) income – except the state pension – to support them in retirement.
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]
Employers can help by supporting employees to lead longer and healthier working lives. This can include up-skilling and retraining workers to help them throughout their careers, and helping them to receive better information, guidance and advice on retirement planning and saving.
1. Improve access to work in later life
Many Gen Xers will rely on working longer to support themselves in retirement, so it’s vital to address barriers to work. Older workers (aged 50+) are more likely to be made redundant and leave the labour market.
Following on from the changes in working behaviours induced by the COVID-19 pandemic, some employers have an opportunity to shift towards roles being “flexible by default”. This could help enable more people to flex their work around their health needs, caring responsibilities and other priorities in later life.
2. Address barriers to work for those in poor health
Poor health is a significant barrier for some Gen Xers’ ability to work. And it’s likely to affect more of them as they age, potentially damaging their ability to supplement their pension incomes with earnings in later life. Employers can help to accommodate older workers’ long-term conditions and challenges, and foster a more open culture in discussing health needs – thereby making more jobs viable and sustainable for people in poor health.
3. Retrain and develop skills
Enabling more Gen Xers to retrain and develop their skills will be vital to getting the most from them in the workplace. Increasing awareness of such opportunities will also be important. For example, while apprenticeships are available to older workers, many older workers aren’t aware of this opportunity, with apprenticeships often still perceived as being for the young.
4. Support carers
5. Adjust pension payments
Nearly one in five Gen X employees (19%) said that automatic increases to their regular auto enrolment pension payments would help them save.[iii] This may particularly help employees who struggle to save due to reasons unrelated to affordability (for example, due to lack of motivation or necessary information). One option would be to escalate people’s payments as their salary increases (above inflation). Gen Xers who said they couldn’t afford to save more preferred this policy to flat increases.
6. “Nudge” people to save
The great majority (91%) of Gen X homeowners with a mortgage expect to pay it off by the time they retire. Yet few Gen Xers opt to put their freed-up income into pensions once their mortgage is paid off. By providing prompts or automatic mechanisms to tackle inertia, employers might be able to support Gen Xers to increase their savings at key moments when affordability increases. Providing information to new and newly promoted employees can also help to engage workers when they are especially receptive.
Gen Xers face myriad challenges in the race to save adequately for retirement. These suggested measures will not only support Gen Xers, but will also contribute towards a more sustainable future for all generations.
This article is part of a series 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. A pension plan is a long-term investment, so its value can fall as well as rise and you could get back 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.