Collective action from government, the financial services industry and employers could help ensure savers in Generation X do not retire with insufficient funds, a study has found.
The report, published by the Pensions Policy Institute and sponsored by Phoenix Group, said there is still time to take action to stop people retiring with insufficient incomes and joined-up policies was essential.
Generation veXed: solving the retirement puzzle looked at the financial wellness of baby boomers, Generation X and millennials, the risks they face in later life and how policy, industry and employer interventions could mitigate risk.
PPI head of policy research Daniela Silcock said "The decline in defined benefit (DB) provision, reductions to the proportion of state pension people will receive, and an increased likelihood of renting, indebtedness and giving or receiving care in retirement mean members of Generation X are at greater risk of reaching retirement with an income that is not adequate, or sufficiently sustainable or flexible."
She explained that while Generation X would reach state pension age over the next 12 to 18 years there is "still scope" for government, industry and employers to take collective action to "mitigate the risks".
"The government could consider whether benefits could be restructured to ensure that those renting in retirement don't lose out on means-tested benefits, such as housing benefit, reducing both the incentive to save and disposable income in retirement."
She added the financial services industry should innovate with products which combine sustainability and flexibility, which appeals to consumers, such as a drawdown and annuity hybrid product, could reduce the sustainable retirement income gap.
The report said employers could support those who need to provide care, or develop health problems, to continue working and contributing to their pensions by allowing flexible working, encouraging shared parental leave, and providing retraining opportunities for workers who need a more sedentary position as they age.
Silcock added: "While individuals may need to take more responsibility for ensuring that they are fully prepared for retirement, government, industry and employers will each play a critical role in ensuring that the future system provides individuals with all of the tools they need to secure a suitable retirement income."
- 55% - the proportion of Gen X in routine or manual jobs at high risk of not achieving a moderate level of income in retirement
- £13,000 - the amount Gen X will lose in comparison to Baby Boomers due to state pension changes
- 27% - the percentage of Gen X in rented accommodation, which means that in retirement a significant proportion of peoples' income will be going on property costs
Phoenix Group chief executive Clive Bannister commented: "Without taking significant action, one-third of Generation X are at risk of failing to achieve more than the minimum income levels in retirement. The reality is that Gen X change jobs more often than baby boomers, are less likely to have benefited from the guarantees of a final salary pension and will not see the full benefits of auto-enrolment that millennials will see. This all points towards lower levels of pension savings, with the added complexities of multiple pension pots.
"We need to recognise that some of Gen X will not feel in a position to take action and that there is no silver bullet for solving their retirement challenge.
"However, with the right support, encouragement, and engagement, we can all help to ensure they don't just sleepwalk into a grey and grim retirement when there is more that could be done.
"It will take a collaborative effort on the part of government, regulators and our industry to ensure more individuals have an adequate, sustainable and flexible retirement income in the future. Consumer initiatives like the pensions dashboard, which we fully support, are an example of how we can make it easier for everyone to see their full retirement picture and know when to take action if they can."
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