Gen X’s pension problem: Five practical steps to a comfortable retirement

For those born between 1965 and 1980 – also known as “Gen X” – saving for retirement can be an uphill battle.

In fact, PensionsAge reports that just 28% of Gen X are on track to have enough saved for a comfortable retirement, compared to 40% across all working generations.

What’s more, 17% of Gen X survey respondents were worried they would never be able to fully retire, with the majority citing a lack of funds as the reason.

This generation has faced multiple challenges in preparing for retirement. However, if this is you, there is still time to build your retirement funds and achieve your goals – even if you’re only a few years away from your ideal retirement age.

Continue reading to discover why Gen X has potentially struggled to save for retirement more than any other working generation, and learn five practical steps you can take to prepare for a comfortable retirement.

Gen X joined the workforce before auto-enrolment was introduced

A key reason for many Gen X individuals falling behind on pension savings is that they might not have been enrolled in their employer’s workplace pension early in their careers.

Introduced in 2012, auto-enrolment means that employers must automatically add all workers aged between 22 and state pension age, and earning at least £10,000 a year, to a workplace pension scheme. By default, a minimum of 8% of qualifying earnings must be paid into the pot, with employers contributing at least 3% of this.

According to the Office for National Statistics (ONS), employee workplace pension participation was 75% in the private sector as of April 2021, compared to just 32% in 2012.

Whilst some individuals in Gen X will have paid into a pension before auto-enrolment was introduced, either privately or through work, many may not have started saving until later in their careers.

In this case, their pension pots potentially missed out on:

• Their own savings
• Employer contributions
• Investment returns
• Tax relief.

What’s more, because pension funds are typically invested over the long term, they benefit from compounding returns – essentially growth on growth.

Combined, this means that a delayed start in pension saving could be particularly costly.

Many in the private sector missed out on defined benefit schemes

Gen X workers have not only received less benefit from auto-enrolment than younger generations, but are also less likely to have a defined benefit (DB) pension than the baby boomer generation.

A DB pension typically guarantees a retirement income depending on the individual’s length of service and salary. This type of workplace pension is generally funded entirely by the employer (but not always), with the income secured for the rest of your lifetime.

According to the Pensions Policy Institute, private sector DB schemes started becoming less common in the early 1970s.

As a result, many in Gen X may have fallen through the gap between previous pension benefits and new legislation, leaving them short of their goals.

Financial challenges have made it difficult to prioritise pension contributions

Many in Gen X may have faced significant challenges that have made prioritising pension contributions difficult.

High housing costs

A large portion of Gen X entered the housing market at a time when house prices were booming. Savills reports that nominal house prices soared by 261.5% between 1995 and 2007.

For those who did buy, the Intermediary reports that 27% of Gen X mortgage holders do not expect to repay their mortgage before age 67.

Financial support for family

Many people in Gen X are at the financial centre of their family in the so-called “squeezed middle”, supporting both their parents and children.

MoneyAge reports that half of Gen X parents have adult children living with them, of whom 72% also provide financial support to their children. What’s more, 11% of Gen X are also supporting their elderly relatives, at an average cost of £12,350 a year.

Economic shocks

Gen X individuals’ finances are likely to have been hit by significant economic shocks at every stage in their careers.

From the early 1990s recession to the 2008 financial crisis – not to mention the Covid-19 pandemic – many in this generation have faced an uphill battle to earn and save.

Of course, other generations have also been impacted by such events. But for Gen X, multiple economic shocks have perhaps been yet another brick in the wall hindering their retirement saving.

Five steps to get your savings on track for a comfortable retirement

If you have struggled to prioritise your pension savings, it can be easy to bury your head in the sand and ignore the looming issue of funding your retirement.

But by taking control now, you can take steps to grow your fund and prepare for the retirement lifestyle you’re dreaming of.

1. Get a clear view of your current savings

It’s helpful to know how much you have saved, how much that pot would grow if it continued at the current rate, and how much you need to save to provide the retirement income you need.

This may involve finding annual statements for numerous pensions accrued throughout your working life. You may also wish to factor in any additional savings, investments, or assets that can be used to fund retirement.

A Financial Planner can help you evaluate your current position, forecast your savings’ growth, and calculate how much your ideal retirement could cost when accounting for inflation.

2. Prioritise pension saving

Once you know how much you need to set aside before retirement, you can create a plan to achieve your goal.

The earlier you prioritise pension savings, the more your pot could grow through compound returns.

By creating a budget that cuts back on unnecessary expenditure, you could divert those savings into your pension. You may need to make some sacrifices, so it’s important to keep your goal in mind to help keep you on track.

Find out how we can support with pension planning to help you get on track.

3. Maximise your employer contributions

Some employers will match your workplace pension contributions beyond the mandated minimum.

It’s often worth familiarising yourself with your employer’s pension offering to ensure you’re taking full advantage of the opportunity to grow your pot.

4. Claim your full tax relief entitlement

As of 2025/26, tax relief is available at up to your highest rate of Income Tax on contributions that don’t exceed your annual earnings – although a tax charge will apply if your combined funding (employer and employee) exceeds your Annual Allowance. The Annual Allowance is usually £60,000. You may have a reduced Annual Allowance if you have a high income or have flexibly accessed your pension or you may have more Annual Allowance if you’re able to carry forward unused Annual Allowance from the last three tax years.

Typically, tax relief is automatically applied at a rate of 20%. If you’re a higher- or additional-rate taxpayer, you can usually claim a further 20% or 25% respectively through a self-assessment tax return, or tax code adjustment for higher rate, on any contributions matched by your income that is taxed at those higher rates.

Claiming your full entitlement can provide a significant boost to your pension pot. If you haven’t applied for the additional tax relief so far, you may be able to backdate your claim by up to four years.

5. Consider an annuity

An annuity provides a guaranteed income in retirement. In exchange for a portion or all of your pension pot, you will usually receive a regular income at a fixed or escalating rate.

You can usually choose to secure an income for the rest of your lifetime or for a fixed term, with the amount you receive depending on various factors.

An annuity might not be a suitable option for everyone, but in some cases, it can provide peace of mind that you will receive a stable income throughout retirement.

A Financial Planner can help you assess your needs and whether an annuity could be an appropriate choice.

Learn more about our retirement planning services and how we could help you achieve your goals.

Get in touch

Email us at enquiries@pen-life.co.uk, or call 01904 661140.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pensions Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.