Stark warning on pension savings
This week research from Dunstan Thomas provided a stark warning about the future prosperity of what are known as Generation X. Those are men and women aged between 40 and 55. The research shows that Generation X are simply not saving enough for their retirement. 29% have never paid more than the absolute minimum into their pensions and 28% of 52 to 55-year olds are paying less than 5% into their pensions. This is only a quarter of what they need to be saving.
Figures from the Institute of Actuaries last year showed that on average Generation Xers needed to save £799 a month into their pensions to achieve the minimum retirement income of £10,200.
Saving £799 a month would be almost impossible for most people, but the figure demonstrates just how important it is to make adequate pension contributions throughout your working life.
It also shows just how valuable final salary pension schemes enjoyed by public sector workers are.
The research also showed that 22% didn’t have any pension savings at all and on average Generation X workers had just under £160,000 in pension savings.
Dunstan Thomas suggested that a number of factors have led to this situation, including the closure of defined benefit schemes over the last 20 years, the 2008 downturn putting pressure on incomes and savings and the restricted access to advisors as a result of the change in advice through the Retail Distribution Review in 2012 which saw more than half of advisers leaving the market.
The current furlough arrangements will also have an impact, with pension contributions being postponed or reduced. Some of which won’t be re-instated any time soon.
For younger people the advice is simple – make sure you are saving into your pension from the start.
For older people in Generation X – you should probably seek advice and get a pension review to check your situation.