In your 40s or 50s? Here are some pension tips for Gen X

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Our recent research found that 54% of Gen X (aged 44-59) are worried their finances won’t cover their retirement, compared to 31% of Baby Boomers (aged 60-80). Nearly 45% of Gen X also expect their living standard to be worse in retirement – compared to 29% of Millennials (aged 28-43). 

So why are Gen X feeling less confident about retirement compared other generations? And what can they do to feel better about their future finances? 

Why might Gen X be less confident?

In years gone by, defined benefit (‘final salary’ or ‘career average’) pension plans were popular. They’re designed to give you a guaranteed amount of money when you retire. That amount is usually based on your salary when you retire or leave the pension scheme, or your average salary throughout your career.

Although defined benefit plans still exist, they declined in the 2000s. Many employers stopped offering them altogether.

Over time, there’s been a shift towards defined contribution (or ‘money purchase’) pension plans. If you have one of these, you and your employer usually pay into it. And that money gets invested. The amount you end up with depends on what’s been paid in and how well your investments have performed. 

So, what’s all this got to do with Gen X? Well, many people in this generation missed out on the full benefits of a defined benefit plan, but they also missed out on the start of auto-enrolment, which wasn’t introduced until 2012. So some people may have been in a situation where, for a period of time, they weren’t really saving for retirement.

Three tips to help you feel more confident about the future

Whether you were caught between two pension systems or not, there are a few things you could do to boost your confidence if you’re feeling worried about your retirement.

1. Check what you’re paying in now

If you’re paying into a pension plan, it’s worth checking how much you’re putting in and seeing whether you could potentially increase your payments, if that’s right for you.

We’ve crunched some numbers to show how someone putting a little more into their defined contribution plan from their 40s onwards can make a big difference. 

Imagine you started working at 22 on a salary of £25,000. And let’s say that, from that point on, you paid 5% of your monthly salary into a defined contribution plan each month, while your employer paid their minimum of 3%* (these are the minimums required under auto-enrolment). You’d potentially have £183,000** in your plan by age 66.

But now imagine that from age 50 you decided to pay in 8%, rather than your 5% minimum. By 66, you could have £206,000 in your plan.

Or what if you started work at 22 on a £25,000 salary but didn’t actually get a pension plan until age 45? If you started paying in 15% (while your employer paid in 3%), you could have £186,000 in your plan by 66. That’s slightly more than you could have if you’d paid in the minimum from age 22.

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It’s also worth checking to see what’s possible from your employer – some pay in more than their minimum and some might match what you’re paying in up to a certain amount. 

Remember, there’s a limit to how much can be paid in across your plans before you could face a tax charge. You can find out more on MoneyHelper. And keep in mind a pension is an investment. Its value can go down as well as up and may be worth less than was paid in.

2. Don’t forget to check your State Pension

Your State Pension alone may not be enough to live on, but it could really help you in retirement. So you may want to check that you’re on track to get the full amount. And if you’re not, you may want to check whether or not you could boost the amount through voluntary National Insurance contributions. You can find out more in our article.

3. Make use of tools and calculators

Not sure how much you might need in retirement? You can check out the retirement tool on our Saving for retirement page. And if you’d like to find out how much you could potentially get from your pension plans in future, you can use our pension calculator.

Remember, if you have a Standard Life pension plan and want to change your pension payments or make a new one, you can do this online or through our app. If your employer set up your plan and you want to change your monthly payments, you’ll need to get in touch with them to find out how this works for you.

*We’ve assumed you and your employer are paying in a percentage of your total salary. This won’t always happen – if you have a plan through your job, it might be the case that you and your employer pay in a percentage of a portion of your salary, known as your ‘qualifying earnings’. 

**Our calculations assume that you achieve 5% a year investment growth on your pension savings, that your salary grows by 3.5% per year and that you pay an investment charge of 1% per year. The figures are in today’s prices and have been reduced to show the impact of inflation at an assumed rate of 2%. 

 

The information here is based on our understanding in November 2024 and shouldn’t be taken as financial advice.

A pension is an investment and its value can go down as well as up and may be worth less than was paid in.

Your own personal circumstances, including where you live in the UK, will have an impact on the tax you pay. Laws and tax rules may change in the future.

Standard Life accepts no responsibility for information on external websites. These are provided for general information.