The House Opinion Article | Gen X pensions are a disaster waiting to happen

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Jason is 48 and from a town just outside of Birmingham. When I arrived at his suburban house on a rainy afternoon last Autumn, he offered me a cup of tea to warm up and helped me hang my soaking coat on the radiator before sitting down to discuss his pension. “I think we should be saving more, but it’s tricky,” Jason explained. “We watch what we buy day-to-day, week-to-week, with shopping and groceries, and I keep tabs on what I can in terms of utilities or what have you. But there’s not a great deal left to think, ‘Right, I’ll put that away at the moment.”

Jason is not alone. Generation X is now aged between 46 and 61, and although many will soon be retiring, most are unprepared for the transition.

7.5m Gen Xers, equal to 54 per cent of the entire generation, are projected to have a retirement income that falls below standard rates of adequacy, according to new research produced at the Social Market Foundation. We spoke to 50 Gen Xers about their pension, and surveyed over 2,000 of them, to understand what’s held them back from saving for a retirement they are now rapidly approaching. We discussed their pension and projected their likely income. We termed their experience “pension shock” to explain the reaction most have when seeing their projection fall far short of their expectations.

Gen X was born between 1965 and 1980. Most were never offered the strong pensions that their parents had retired on, which provided a fixed income for life. Instead, they were told to manage their own money, and for the first time in living memory, make critical decisions over contributions and investment. This strategy was poorly thought through and barely communicated. Most workers were offered no training or advice to help them with the transition. Many failed to save anything at all.

Auto-enrolment was legislated in the 2010s, acknowledging this failure by forcing workers to contribute to their pension by default. It raised contributions almost overnight and will serve Gen Zers like me well. But by the time auto-enrolment came into being, Gen X had already lost out in huge portions of their working life, missing critical years for pension accumulation.

“I wish I’d started thinking about pensions as soon as I started working,” Blake told me over a video call from his home in Wales. “But you know what it’s like: You’re seventeen, eighteen, and you’re invincible! You’ve got your whole life ahead of you! You’re not taking £40 a month off me! … And then, all of a sudden, snap your fingers, and you’re forty or fifty or sixty years old. It does come so quick.”

Speaking to Gen X about their pensions today can feel like watching a train crash. The tracks have been laid. The catastrophe set in motion. And while policymakers are beginning to wake up to the looming crisis, their ability to intervene is limited.

One option is to get Gen X in front of advisors. Just 11 per cent have ever sought financial advice to manage their retirement. For many, the cost is out of reach. That’s why we’re pushing for a Financial MOT, providing expert guidance on matters relevant to money, saving, and investment, for free to any applicant. The policy polls well with Gen X, with 58 per cent in favour of increasing access to financial advice even if it required higher taxes, and I saw the benefits in action. After discussing her pension with me, one woman in the northwest explained: “I think government should put it out there more for people to see mortgage and financial advisors, and actually sit down with someone and go through what you’ve gone through today.”

Gen X’s retirement is approaching fast, and averting disaster will require an emergency mindset from the government to rapidly provide the financial advice that has been denied them throughout their working life.

Gideon Salutin is Chief Economist at the Social Market Foundation