Who should be most concerned about their retirement?
THE last two years – the last two decades, come to that – have not been kind to any of us trying to save for our old age.
In fact, at times it has felt like a black cloud has been following us around, soaking us with rain.
However, one group is probably wetter than everyone else.
If you are one of the 14 million people in the UK in the 41-55 age bracket, you are strongly advised to pay some urgent attention to your retirement planning.
Your age makes you a member of Generation X, as you were born between 1965 and 1980. You are in a group that accounts for one in five of the overall population.
You're not quite as old as the Baby Boomers, who were born from 1945-1964, but you're not quite as sprightly as the Millennials, who followed you and were born from 1981-1996.
However, you are part of the generation that will be up next for retirement – you'll be retiring over the next 30 years.
And you are a particular cause of concern for the research boffins at the International Longevity Centre (ILC) in London, who have just published their report ‘Forgotten Generation? Retirement Income prospects of Generation X'.
The fact is, a third of you in Generation X run a real risk of retiring with insufficient incomes, says the ILC.
There are a number of reasons for this. The main one is timing.
Many of you entered the job market too late to benefit from final salary pensions, that disappearing species which would have given you a solid guarantee of a certain level of income at retirement linked to your final salary and your number of years of service.
Instead, your workplace pension is more likely a defined contribution (DC) pension, where you have no guarantee. Your outcome will depend on the performance of the investments made by your pension company.
Further bad timing: your ability to save was hampered by the austerity of the ‘Great Recession' of 2008-2013, when you were in your prime saving years between 28 and 43. Large numbers of Gen Xers froze their pension contributions during that period.
Now you are being walloped again, this time by the economic fallout of the Covid pandemic. In fact, a quarter (24 per cent) of you have been either furloughed, made redundant, or forced to reduce your working hours in the past year. Not only has this cut your ability to pension save, it has also meant that a fifth (20 per cent) are eating into their other savings, just to make ends meet.
No wonder the ILC is telling us that that half of people aged 41-55 are worried that they won't have the lifestyle they want, when they retire.
But rather than dwell on the above challenges, let's ask a positive question: what can be done?
A good first step is to talk to an independent financial adviser, who can do two things.
First, they can assess how much you have saved so far, where you stand with both your state and your workplace pensions.
Second, they can advise you on making voluntary top-up contributions to your pension, above and beyond your normal workplace saving. The one thing about doing this at a time like now, when markets are at a low, is that your money can benefit from the recovery and growth that will surely follow.
Or as the song goes: ‘there's gonna be sunshine, after the rain!'
:: Michael Kennedy is an independent financial adviser and pensions specialist and can be contacted on 028 71886005. Further information on Facebook at Kennedy Independent Financial Advice Ltd or at www.mkennedyfinancial.com