New research suggests that around five million mid-lifers, aged 40 to 54, could face a challenging retirement.
To understand why, it helps to look at how the UK retirement landscape has evolved over the past 50 years.
How pension provision has changed
The structure of retirement income in the UK has shifted significantly over time:
- In 1978, the State Pension moved from a largely flat-rate benefit to a combination of flat-rate and earnings-related pensions for employees
- Over the following decades, the earnings-related element was subject to several changes, often increasing benefits and government costs, before being replaced in 2016 by a new flat-rate State Pension
Workplace pensions have also seen major changes:
- In the 1970s and 1980s, final salary, or defined benefit (DB), pension schemes were common across both the private and public sectors
- Personal pension plans were typically limited to the self-employed
However, this position has shifted considerably:
- By 2025, only 3% of private sector DB schemes were still open to new members
- Around three-quarters of these schemes had also stopped building up benefits for existing members
More recently, automatic enrolment has reshaped pension saving:
- Introduced in October 2012 and fully phased in by April 2019
- Workplace pensions now cover around four in five employees and workers
- The self-employed, however, remain outside of this system
From that history emerges a theoretical gap for those who started their working lives roughly in the fifteen years from the turn of the century. Outside the public sector, most would not have joined a final salary pension scheme, and some would have had low or even no pension scheme membership until they joined a workplace pension, thanks to the phasing in of AE.
New research undertaken by one of the UK’s major pension providers has discovered that the theory is very much a reality. It found a generation of people born between the early 1970s and late 1980s who were too young to benefit from DB schemes, but also too old to feel the full benefit of AE. Five million of the mid-lifers, currently aged 40–54, are not on track for an adequate retirement. Of that 9% of the UK adult population at risk are part-time workers, renters and those who have taken a career break.
The research did offer some hope for a way out of the pension mid-life crisis: start putting more into retirement plans now, as there are at least 13 years before State pension age arrives.
The value of your investment and any income from it can go down as well as up, and you may not get back the full amount you invested.
For help preparing for retirement, reach out to SMH’s team today. Give us a call at 01142 664 432 or email info@smh.group for more information.
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