Organising your pension is an important part of your finances. Unfortunately, life is not predictable, and sometimes other things get in the way of retirement savings.
New research shows that Gen X workers, especially those who are self-employed, risk retiring without enough set aside in their pension. Let’s take a look at what the data shows and what steps might improve this situation.
Who are Gen X workers?
Generation X (or Gen X for short) refers to people born anytime between the mid-1960s and the early 1980s.
They are basically the generation that sits between the Baby Boomers and the Millennials.
This generation grew up during a period of high international tensions and rampant inflation during the 1970s.
Why is this generation less likely to have a pension?
According to research from the International Longevity Centre UK (ILC), self-employed Gen X workers are five times more likely than other workers to have no pension.
There are a number of reasons why this generation’s retirement prospects are slipping through the cracks:
- Self-employment and working in the gig economy are on the rise among those in Gen X
- This independence can lead to periods of low income or insecure pay
- Pension auto-enrolment schemes do not apply to business owners
- This group can’t rely on an employer to top up their pension pot
- The earnings and savings of many took a hit during the coronavirus pandemic
What might help Gen X workers with their pension?
As with anything, there’s no single simple solution.
Sophia Dimitriadis, research fellow at ILC, explains the difficulty of the situation and potential remedies: “We know that insecure incomes, further uncertainty heralded by the economic impact of COVID, and a lack of access to traditional pension schemes and auto-enrolment significantly affect the ability and the willingness of self-employed Gen Xers to save sufficiently for their retirement.
“What is desperately needed, is to expand auto-enrolment to the self-employed – but in a way that makes saving for retirement flexible to allow people to respond to income shocks – something self-employed Gen Xers told us they want in our research. With self-employment increasing rapidly among older age groups – the case for action is urgent.”
How does a pension work in the UK?
Some people mistakenly believe that they will be able to rely solely on the UK State Pension during retirement. But for most, this won’t provide enough funds for a comfortable retirement.
For those in employment, paying into a private pension should be organised by your employer and take place automatically. The situation if you’re self-employed is different.
Owning your own business can be a fantastic path to take. But one thing that needs serious consideration is your pension. It is something that you will have to take charge of. This means a full understanding of the tax rules along with wrapping your head around things like the pension annual allowance.
It does not have to be scary or complex, but proper planning is vital. If you own your own business but have no idea where to start when it comes to your pension, then it may be worth seeking professional advice to get a decent plan put in place.
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