Half of ‘richest generation in history' won't be able to afford a decent retirement

Telegraph

06-08-2025

They have been labelled the richest generation in history, with bumper pensions and mortgage-free homes ensuring comfortable retirements.
But the baby boomers may not be as financially secure as their reputation suggests.
Half of the generation born between 1946 and 1964 are expected to fall short of achieving an adequate income in retirement, according to research by asset manager Vanguard.
The report assessed 'retirement readiness' – whether pre-retirees had the savings needed to maintain their current lifestyle in retirement, or enough to achieve Pensions UK's 'moderate' retirement living standard.
It found that 62pc of high-income baby boomers – earning over £74,600 – have sufficient savings to meet their income goals in retirement.
Most low-income workers (74pc) on less than £17,700 a year will be able to maintain their lifestyle due to reliance on the state pension, even though many will fall short of the 'minimum' retirement living standard.
However, middle-income baby boomers are most at risk of falling short, according to the report. Just 40pc of those in the middle income bracket of between £32,600 and £46,599 were projected to meet their expected retirement income. Overall, 51pc of boomers are expected to do so.
Having a 'gold-plated' defined benefit pension was the biggest factor influencing whether baby boomers were on track for retirement, according to the research.
These lucrative pension schemes guarantee an inflation-linked income in retirement, based on final or average salary. They are close to extinction in the private sector, as they have become too expensive for employers to maintain.
They have instead been replaced by much less generous defined contribution schemes, where the final value depends on how well investments perform.
The report found that 69pc of baby boomers with defined benefit pensions were 'retirement ready', compared with just 28pc of those without.
The problem of retirement adequacy is set to become more acute for younger generations without access to defined benefit schemes, it added.
Experts have warned that Britain faces a 'pension savings crisis' as the current minimum contribution level is not enough to fund adequate retirements.
Under auto-enrolment rules, employees put at least 5pc of their salaries into a pension, in addition to a minimum 3pc employer contribution and government tax relief.
The Government's pensions review will look at whether these minimum contributions need to be raised, although the Chancellor has committed to not making any changes this Parliament.
Separate research by Phoenix Insights has found that Britain's retirement crisis is set to peak in 2040 when the incomes of almost three million pensioners will no longer be enough to cover their needs.
Georgina Yarwood, of Vanguard Europe, said: 'Despite common perceptions, many UK baby boomers aren't as financially secure as assumed, with only around half being retirement ready.
'Middle-income boomers face the greatest shortfall, and without access to generous defined benefit workplace pensions, many risk falling short in retirement. Our findings show that overall, baby boomers with defined benefit pensions are twice as likely to meet their retirement goals than those without.
'Bridging the gap could require some tough choices like tapping into home equity, delaying retirement or cutting back spending.'
Ian Cook, of wealth manager Quilter Cheviot, said: 'Although boomers benefitted from house price inflation, many will be forced to downsize and release equity or take out loans to fund their lifestyles in retirement. There's a perception they are better off but this isn't always the case.
'A lot of this is down to the switch from defined benefit to defined contribution. It means many people are sleepwalking into retirement without the income they hoped for.'