Those born between 1965 and 1980 expect to be working for longer as they miss out on pension benefits enjoyed by their parents.
Only one-third of people in the UK aged between 43 to 58 believe they will be retired by the time they reach the state pension age, according to the financial advisor Just Group.
The state pension age is currently 67 for workers born after April 1960, although this will rise to 68 between 2044 and 2046.
According to Just Group, women within the Gen X bracket are more pessimistic than men about timely retirement, as only 31% believe they will be able to stop working by the age of 67, compared to 39% of men.
Looking at both genders in the younger segment of this cohort, between the ages of 43 to 48, this figure falls to 27%.
Over the last 25 years, the UK has seen a rise in its average retirement age as life expectancy has increased and older workers feel increasingly insecure about their finances.
Recent government data shows that men are currently leaving the labour market at an average age of 65.3 years, and this lowers to 64 years for women.
For men, the average retirement age reached its lowest point in 1996, when it hit 63 years, and the lowest average for female workers was in 1986, when women retired at an average of 60.3 years.
What is driving retirement anxiety?
There are a number of reasons why Gen X workers may feel unable to retire at the state pension age, and they’re often based on factors that are out of their control.
“This is the age group most at risk of falling into a pensions gap,” said Stephen Lowe, a group communications director at Just Group.
“Few will be able to rely on defined benefit pensions which provide more generous, guaranteed payments to many of the ‘baby boom’ generation that preceded them, while automatic enrolment into workplace pensions started too late to make much of a difference.”
Defined benefit pensions (DBs – or sometimes known as final salary schemes) are in decline in the UK’s private sector, but they’re often seen as the gold-standard for retirement savings.
A DB plan is a type of workplace pension (separate from the state pension), and it means that the retirement income you’ll receive will be based on the number of years you’ve been a member of the scheme, as well as your salary.
This differs from an alternative type of workplace pension scheme, called a defined contribution (DC) plan, that is becoming more and more common.
One of the main differences between the two approaches is that with a DB plan, employers have more responsibility to provide an income for workers when they retire.
Alternatively, with a DC plan, it’s the employee who must manage their own pension fund investments, although employers will add contributions to retirement pots.
These types of schemes are generally considered less predictable because the value of your pension can go up or down depending on how investments perform, meaning there’s no set amount you’ll be paid when you retire.
Automatic enrolment has come too late
As well as being more unlikely to have a DC pension scheme, many individuals in their 40s and 50s feel cheated because they’re not particularly benefiting from a policy called auto-enrolment.
Automatic enrolment is a practice that has been introduced incrementally since 2012, and it does pretty much what it says on the tin.
In the past, workers could choose whether they wanted to join a pension scheme or not, whereas nowadays, employers must register their eligible staff for a workplace retirement plan.
There is still a possibility to opt-out, although in August 2022, only 10.4% of newly enrolled employees chose not to join their workplace pension scheme (compared with 7.6% in January 2020).
Automatic enrolment means that people are far more likely to start saving early for their retirement, but this isn’t much use for those in the Gen X generation who are now nearing the end of their careers.
The sandwich generation
On top of missing out on advantageous pension schemes, individuals born between 1965 and 1980 are contending with a financial landscape unseen by their parents.
As people are living for longer, an increasing number of adults are now becoming part of ‘the sandwich generation’.
This is a term used to describe the group of people caring for a parent over 65 whilst also financially supporting a child or young adult.
In a YouGov survey from 2020, 57% of surveyed Gen X individuals said they wanted to save more but were struggling to do so, and 9% of total respondents cited childcare costs as a reason.
Around one in ten of respondents also said they couldn’t afford to save more as they were financially supporting adult children.
Other cited explanations for a lack of savings were an inadequate salary, housing costs, a restricted ability to work, health problems, or saving for something other than retirement or a property.
Added to this, income losses linked to covid-19 significantly hit Gen X’s ability to save for retirement, although it did encourage some to start thinking about their pension plans.
According to data published by the UK’s International Longevity Centre in 2021, 20% of those in the Gen X bracket are now saving less or spending their savings as a result of the pandemic.