Over half of those termed “Gen X” (born between 1965-1980) are reported to be facing a financial cliff-edge in their retirement, with 7.5 million (54%) having inadequate savings, and 2 million (15%) having no housing equity or investments to fall back on.

A worrying new report from The Social Market Foundation (SMF), a leading cross-party think tank, is warning that many workers in their 40s and 50s may face a “pension shock” in the coming decade, as they realise their retirement income is likely to be significantly lower than expected.

Gen X (those born between 1965 and 1980) fall in the gap between two pension systems. Many were too young to benefit fully from generous defined benefit schemes… but too old to build up significant savings through automatic enrolment, introduced in 2012.

The result, says the SMF, is that when many in this cohort begin to retire over the coming years, millions will discover their pension savings fall well short of maintaining their current standard of living.

The research, sponsored by the Standard Life Centre for the Future of Retirement, found that:

• 54% are projected to have inadequate pension incomes in retirement
• 39% will fall short of maintaining their current standard of living
• 35% could fall below minimum retirement living standards

The research also suggests many workers are unaware of the scale of the problem.

Around half of Gen X respondents expected a higher retirement income than current projections suggest.

When informed about their likely retirement finances, 16% said they would cut spending on essentials such as food, energy or transport to increase savings.

Regional differences

The impact is also uneven across the country. Nearly half of Gen X in the North East (49%) are projected to fall below minimum retirement living standards, compared with 26% in the South East.

Women, renters, those who have divorced, people with long-term health conditions and ethnic minority groups are also more likely to be affected.

The report warns that pension insecurity among this large cohort could also become a more prominent political issue as Gen X approaches retirement age.

Gideon Salutin, Chief Economist at the Social Market Foundation, said: “This generation now approaching retirement forms a slow-moving avalanche.

“Without action, their retirements will be meagre. Despite many of them working longer than their parents and making more money than their parents, Gen X is in for a substantially worse retirement.

“Action is urgently needed. The Pensions Commission provides a perfect opportunity for change, but time is running out for Gen X. Unless policymakers make difficult decisions, the next wave of retirees looks likely to fall into inadequate retirements.”

Catherine Foot, Director of the Standard Life Centre for the Future of Retirement, said: “Gen X are at the sharp end of a building retirement crisis. While today’s retirees are better off than previous generations, this trend is set to go into reversal within the next decade and into the 2040s.

“There is a relatively short window now in which to act and two key enablers for Gen X will be pension dashboards that help people get a clear picture of the outcome they’re on track for and policies designed to support longer working lives which leads to greater financial security.”

The report also calls for a number of policy changes to improve retirement outcomes, including increasing default auto-enrolment contributions to 12%, expanding access to the Lifelong Learning Entitlement, and expand the MoneyHelper Pension Wise programme so that all of Gen X can access financial guidance.

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