According to a nine month study, captured in a 53 page report entitled Exploring the Retirement Prospects of Generation X published by the pensions and wealth tech company Dunstan Thomas this week, the average value of non-pension investments of 39-54 year olds resident in the UK is GBP71,591.Investment valuations rise steadily with age, so that 39-41 year olds have savings and investments worth an average of GBP63,809. The oldest Generation Xers aged 51 to 54 have GBP78,375 held in savings and investments outside their pension.
The highest level of savings and investments is held by Generation Xers living in London – they have an average of GBP138,021 in non-pensions savings and investments. By contrast, Gen Xers living in the Northeast have saved just GBP46,720 on average. A quarter of the UK’s Gen Xers claim to have no investments or savings at all!
Buy-to-Let (B2L) investment properties appear to have the single largest impact on personal investment values (even if investment values may be based on equity in property). In London, 12 per cent of Gen Xers hold B2L properties, whereas in the Northeast just two per cent buy an additional property as an investment. Nearly a fifth (18 per cent) of high-income households, bringing in more than GBP5,000 a month after tax, have at least one B2L property to their name.
Over half (52 per cent) hold a savings account with a bank or building society. Over a third (34 per cent) have cash ISAs and 15 per cent hold Stocks and Shares ISAs. Just 10 per cent of Gen Xers hold stock exchange listed shares not inside funds. Nine per cent hold bonds. Six per cent own Buy to Lets. Four per cent have unit trusts, OEICS or other fund holdings not inside an ISA wrapper. Just three per cent hold Peer to Peer lending investments. Four per cent have investments but appear not to know what asset classes or tax wrappers they are in.
Of those holding investments, a fifth of male Gen Xers (19 per cent) and a quarter (28 per cent) of women don’t know which of their investments have performed better in the last three years and just under half (48 per cent) consider their investments recession-proof in case of a market downturn.
Nearly one in five (18 per cent) Gen Xers think Environmental, Societal and Governance (ESG) factors matter significantly more in investment selection today than just two years ago. A further nine per cent think ESG matters a little more than two years ago. Just a tenth of Gen Xers think that financial performance is the only measure of value of companies that they are investing in directly or indirectly through funds.
The average pension savings of UK Gen Xers is valued at GBP159,837 and make an average pension contribution of GBP200.60 per month. This means that a little over twice as much, on average, is saved inside a pension than outside.
This money is divided between different types of pensions: 27 per cent of Gen Xers have a minimum Auto-Enrolment (AE) pension, 27 per cent a Defined Benefit (DB) pension, 17 per cent a traditional Defined Contribution (DC) workplace scheme, 20 per cent a SIPP or other personal pension, while 10 per cent didn’t know what type of pension they have and 22 per cent claimed to have no pension whatsoever.
The average grand total pension and non-pensions savings and investments amongst UK resident 39-54 year olds stands at GBP231,428 today.
The October 2019-published study by the Institute and Faculty of Actuaries (IFoA), building on the Pensions and Lifetime Savings Association’s (PLSA) Retirement Living Standards research, suggests that Gen Xers need to be putting GBP799 per month into their pension to afford the PLSA’s moderate retirement lifestyle income target of GBP10,200 per year.
Dunstan Thomas’ findings show average monthly pension contributions for Gen Xers is currently GBP200.60 – just one quarter of the recommended target. Even if the declared investment and savings wealth sitting outside pensions is added, the average Gen Xer has only saved a third of what they need to, to enjoy a modest lifestyle in retirement. That leaves a great deal of saving and wise investing to do in the next few years if older Gen Xers want to retire at the current State Pension age of 66.
Most Gen Xers (84 per cent) are making key financial decisions alone or together with their partner. Nearly half (44 per cent) don’t consult anyone at all. A fifth (21 per cent) of Gen Xers source supporting financial information from financial comparison sites like MoneySupermarket.com; while 13 per cent rely on the national media’s personal finance pages; and the same percentage go to friends and family for more information.
Just nine per cent of the 2,011 39-54 year olds captured in the nationwide Gen X Retirement Prospects study have consulted an Independent Financial Adviser in the last 12 months. This percentage rises to 16 per cent for Gen Xers living in London.
Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas. Says: “It’s catastrophic that 22 per cent of Gen Xers claim to have no pension whatsoever and slightly more than that, 25 per cent say they have no savings or investments. Those that have pensions and investments are on average saving only a quarter of what they need to be putting aside to fund even a modest retirement. What is quite alarming is that only five per cent of this group look to be anywhere near on track and it’s a real surprise that this is not already a national scandal.
”Despite the inadequacy of the amounts they are saving, our study reveals that Generation X is rapidly awakening to the concept that which stocks their money is put to work in, will have a real impact on the task of averting climate change and saving the planet.”