New research has revealed that middle-aged workers will have inadequate sums when they look to retire.
Savers currently in the middle age backet are likely going to face a bleak old age as data suggests they will have inadequate sums when they retire.
Nearly one in three people aged between 40 and 45 will achieve only a minimum standard of living in retirement, while one in four will rely more on the state pension or have no savings at all to lean on.
Known as Generation X, the research from the International Longevity Centre (ILC) carried out for Standard Life found that 60% of people in this age group with defined contributions are running the risk of not reaching a modest income in retirement.
The data, as reported in This Is Money, found that middle aged savers missed out on auto enrolment in their early careers and were also subject to two financial crises, which may have led to unemployment during their careers.
Following the findings, Sophia Dimitriadis, research fellow at ILC and author of the report Slipping between the cracks, stated that “there’s still time to support the retirement prospects of Generation X”.
“With many Gen Xers facing often temporary financial pressures – the most effective solutions will offer some flexibility and tap into moments when people have a bit more money.
“In the meantime, we urge Gen Xers to play their part by trying to capitalise on moments where they can afford to save more – such as following a pay rise or a decrease in mortgage payments to increase their pension contributions.”
The state pension is currently worth £9,300 a year for those who have a full National Insurance record, and the data found that 28% of Gen Xers will mostly or solely rely on the state pension to fund their retirement.
Just seven percent are saving enough – which is defined as 21.3% of salary – for a moderate lifestyle when they retire.
How to improve the outlook
The ILC provided some ways to help improve the future for these workers, aside from encouraging them to save more on their own.
For example, minimum pension contributions could be increased via auto enrolment or giving more flexibility to allow people to temporarily pay into their pensions at a lower rate if they are struggling financially.
The ILC also recommends that the government introduces a flat rate of pension tax relief at 30%, rather than base it on income tax rates.