Gen X face 'pensions gap' and may have to work for longer

Generation Xers are at risk of falling into a "pensions gap" by missing out on defined benefit pensions and not building up enough retirement savings under automatic enrolment, according to a new report.

Born in 1965-1980 and currently aged between 43 and 58, many members of Gen X expect to carry on working beyond State Pension Age.

'Reality of retirement'

Only one-third (35%) of the Gen X cohort believe they will be retired by the time they qualify for a State Pension, according to research by retirement specialist Just Group.

Nearly four in 10 (38%) believe they will have to work later and the remaining quarter (27%) are unsure.

The State Pension Age is currently 67 for workers born after April 1960. It will rise to 68 between 2044 and 2046, affecting those born after April 1977.

People in their 40s and 50s are facing significant financial, personal and lifestyle pressures "as the reality of retirement looms large", explained Stephen Lowe, group communications director at Just Group.

"This is the age group most at risk of falling into a pensions gap. Few will be able to rely on defined benefit pensions which provide more generous, guaranteed payments to many of the 'baby boom' generation that preceded them, while automatic enrolment into workplace pensions started too late to make much of a difference. State Pension Age has also been pushed back through their working lives.

"Many will face pressures providing support for other family members such as ageing parents or helping adult children who are struggling financially. With this combination of demands on their purse, it is little surprise that so many of Gen X are expecting to have to keep working later in life."

Variations within Gen X

Expectations vary among different demographics of Gen X, Just Group found.

• Women are more pessimistic about their chances of being able to retire by age 67 than men (31% vs 39%).
• Among the youngest of this generation, those currently aged 43-48, only 27% believe they will be able to retire by 67 with 46% believing they will have to carry on working for longer.
• Homeowners are more confident about their prospects than those who live in a rented property, with 40% expecting to retire by State Pension Age compared to 21% of renters.

"Nearly twice as many homeowners as renters expect to stop working at or before 67," said Stephen Lowe from Just Group. "Those who live in their own property at retirement do have the benefit of a financial asset they could fall back on if circumstances required later in retirement.

"But that's assuming they have been able to pay off their mortgages which is by no means certain given the other financial pressures they have faced."

Self-employed and carers

Earlier research from the International Longevity Centre (ILC) and supported by Phoenix Group showed that Gen Xers who are self-employed and those with caring responsibilities are at higher risk of having a shortfall in their pension provision.

The Carer's Leave Act, which is expected to come into force in 2024, will give employees a statutory right to one week's unpaid leave to care for a dependant. This is aimed at supporting unpaid carers to remain in work alongside their caring responsibilities.

People who are self-employed would benefit from a form of automatic enrolment into a pension with flexibility to allow for fluctuations in income, the ILC said.

"Many Generation Xers don't have adequate pension savings in place and sadly this financial vulnerability is exacerbated if you're also self-employed," said Andy Curran, chief executive of Standard Life, part of Phoenix Group. "Many people who are self-employed are likely to face periods when they are on variable or insecure pay, but there is also a worrying lack of incentive for them to save for their financial futures.

"With self-employment and the gig economy on the rise it's vital that saving for retirement is encouraged and more easily facilitated for these workers."