Generation X faces pension shortfall in retirement

According to a new report, UK workers aged between 35 and 54 years old are at risk of facing an income shortfall after they finish working.

The report, compiled by the Pensions and Lifetime Savings Association, states that people aged 55 and over may have a decent amount of income due in retirement, as they have benefited from final salary pension schemes and may have property wealth. Younger workers will have been auto-enrolled into a pension scheme quite early in their career, although they may still face a shortfall during retirement.

The ‘Retirement Income Adequacy: Generation by Generation’ has found that 53% of the UK workforce, or 13.6 million people, are at risk of not meeting the ‘target replacement rate’, which equates to 67% of earnings before retirement.

The study also revealed that around 6% of the workforce, or 1.6 million people, are at risk of not meeting the standards for minimum income, which is set each year by the Joseph Rowntree Foundation. The amount set for 2016 is £9,500.

The study suggests that workers aged between 35 and 54 years old should contribute more to their pensions, or consider working for longer. Another suggestion is to utilise property to generate a higher income during retirement.

The Pensions and Lifetime Savings Association is calling for the setting up of an Independent Pension Commission to tackle the problem. One suggestion by PLSA is to increase total pension contributions to 12%, from the government, employers and workers.

The report demonstrates just how important retirement planning is for all age groups, and suggests that Wirral employees would be wise to put serious thought into it.

Auto Enrolment is not regulated by the Financial Conduct Authority.