The government must encourage savers to boost their pension contributions to help the 'significant number 'of 40 to 55-year-olds who face financial hardship in retirement, a report has claimed.
The International Longevity Centre said the government should develop a policy where employee contributions are automatically escalated at the point a saver receives a pay increase, with the employer matching this.
In its report Slipping between the cracks?, published yesterday (March 2), it said this would operate alongside a timetable for general increases of default auto-enrolment contribution rates.
The ILC found nearly one in three Gen Xers - those born between 1965 and 1980 - were ill-prepared for later life having missed out on final salary schemes, yet being too old to fully benefit from auto-enrolment.
Many Gen Xers were unaware they were saving too little to achieve the income they desired with just 7 per cent of defined contribution savers set to achieve a moderate lifestyle in retirement.
Meanwhile, 17 per cent did not know how much they contributed and 44 per cent reported gaps of at least 10 years in their contributions.
The majority (57 per cent) of Gen Xers said they wanted to save more but could not afford to due to other financial pressures.
In addition, Covid-19 has further disrupted people’s retirement plans, with one in five savers in this age group saving less as a result.
Sophia Dimitriadis, research fellow at the ILC, said: “Generation X are heading for trouble. Too many Gen Xers simply can’t afford to save as much as they need to or are juggling too many other priorities to know where to start.
“And COVID has just made things worse, with lots of people having to dip into their pension pots to make do in the short term.”
In order to make up for shortcomings in their savings, many Gen Xers plan to work for longer but the ILC has warned many may not be able to do so.
Poor health, caring responsibilities and age discrimination could be barriers for older workers and Covid-19 has further highlighted this with many facing long-term unemployment or even early retirement.
In order to address this, the ILC suggested the government could extend, or amend, its Kickstart Scheme to all adult workers affected by the pandemic, including those aged 40 and over, who are currently unemployed.
It could also require employers to make all jobs flexible by default so that employees can alter their working patterns and arrangements throughout their lives.
Andy Curran, chief executive officer of savings and retirement at Phoenix Group, said: “Now, more than ever, we need to support and engage with those who feel ill-prepared for later life as we look to build back better. For many the preferred option is to stay in work for longer so they can save more to enable the retirement they desire."
He added: “It’s clear that none of us can solve this challenge on our own, it will require government, industry, and policymakers working together to ensure the best possible outcome for this generation.
"But this report also shows that it’s not too late to act to ensure Gen Xers get the support they need to live the life they want.”
amy.austin@ft.com
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