The recent General Election campaign highlighted the demands of the baby boomers and Generation Y or millennials. Politicians vied for attention from these two groups with promises on state pensions, social care and student debt.
Less sought after were the votes of Generation X (those born between 1965 and 1980) and now aged between 37 and 52. This demographic makes up the highest contributors to income tax. They are more likely to be supporting children, while still paying for their home. Some may also be supporting parents or grandparents as carers.
This group are on course to face a poorer retirement than their older or younger cohorts. Unless working in the public sector, they are less likely to have benefitted from final salary pensions and are more likely to have pensions which rely on investment returns. They may now be offered auto-enrolment pensions by their employers but have less time before retirement to grow their funds than younger workers.
Some may benefit from an inheritance later in life, swelled by higher property values and more generous inheritance tax allowances but putting off retirement until inheriting may not be a practical solution. If older parents need to fund care costs, wealth may be eroded, may not cascade down till much later or could be taxed more heavily in the future. As lifespans increase, this generation may be trapped in work they find harder to do, but with insufficient funds to afford to retire.
The average pension pot for this age group today is £27,000, hardly enough to fund a comfortable retirement.
Employers can help by offering this group of key workers access to mid career planning. Waiting until they are ready to retire may be too late for them to benefit from long term saving with some of the tax breaks designed to help them plan ahead.
The Government recognise the benefit of workplace access to information and advice and allow employers to spend up to £150 per year per employee on the provision of financial education to staff. This is exempt from tax and NI. Before the Election the Government planned to increase this to £500 per year and the Summer Finance Bill should confirm this. So perhaps Generation X will not be forgotten after all?
Director of Public Policy, LEBC
Please remember, no news or research item is a recommendation or advice to buy. LEBC Group Ltd is not responsible for accuracy and may not share the author’s views. If you are unsure of the suitability of any investment or product for your circumstances please contact an adviser. The Financial Conduct Authority does not regulate tax planning.Back to News & Views