Why it is time to focus on Generation X

Property ownership is almost a British obsession and apparently "an Englishman's home is his castle". I wonder if at the time the phrase became popular the ratio of house, or castle prices to average earnings was as high as it is now.

At present, house buying is at its lowest level since 2013 and the latest surveys from banks and building societies suggest house prices are no longer rising. However, buying a property is still high up on the agenda for many people in the UK who look to bricks and mortar to provide not only a home but often a retirement asset. But the subject of property ownership is met with mixed responses, more often than not split by generation.

Baby boomers are generally the fortunate ones and they know it, Millennials are the unfortunate ones, and they also know it. But how does Generation X (35-54 year olds) fit into this scenario? The majority of this generation find themselves in the unenviable position of being too young to benefit from generous defined benefit (DB) pension schemes and house price growth but too old to receive the full benefits of automatic enrolment.  

So while we're all sat around worrying about Millennials and looking at Baby Boomers with envy, it can be easy to forget the plight of Generation X. As a result of missing out on DB pensions and not receiving the full benefits of automatic enrolment, this generation may need to work longer and certainly consider using other assets, such as property, to generate a higher retirement income.

Research published by the Pensions and Lifetime Savings Association (PLSA) highlights that nearly half (47%) of Generation X, or 8.3 million people in the UK, are planning to use property to help finance their retirement. However, while using property to help supplement your pension income in retirement is a sensible idea, our research shows that 23% or 1.9 million people within this group have yet to buy a property.

This is worrying as it suggests that some people in this generation are basing their financial security on an asset they currently don't own and may possibly never own. The problem isn't limited to London where house prices are the highest in the country. In fact, reliance on using ‘unowned' property in retirement was highest in the East (14%), followed by London (13%) and then Scotland (12%). At the other end of the scale, the lowest was in Yorkshire and the Humber where there was only a 2% reliance on unowned property.

While there are those in Generation X considering their retirement income, the realities of everyday spending needs are further pressure on their finances and around half are too busy worrying about day-to-day living costs to think about their retirement income (51%). Over half of respondents (54%), told us that they don't think much about retirement income but generally think ‘it will work out OK in the end'.

Further research conducted by the PLSA analysed the incomes different UK generations can expect in retirement. 'Retirement Income Adequacy: Generation by Generation' revealed Generation X typically did not save into a pension during their early working lives and are only just now starting to save through automatic enrolment.

So what does this mean for the pensions industry? More needs to be done to support Generation X in understanding how their pension, property and any other savings might top up their state pension in order to give them a decent income in retirement. We're asking the government to assess the best way for Generation X to engage with retirement income planning and, in particular, consider whether interventions related to key life events, such as a mid-life financial health check, would result in better outcomes.

Graham Vidler is director of external affairs at the Pensions and Lifetime Savings Association

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