London’s Generation Xers want to retire by age 63 but most realise that won’t be possible

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The average pension savings pot of Generation Xers living in London is worth £223,790 today, comparing favourably with the UK nationwide average, which is over £37,000 less at £186,611. Gen Xers living in London are making monthly pension contributions of £319.30, much higher than the national average amongst 39-54 year olds living across the UK of £200.60, found the new ‘Generation X Retirement Prospects’ study commissioned by pensions specialist fintech, Dunstan Thomas.

However, even Gen X Londoners are substantially under saving for retirement when their current average pension contributions are compared with recommendation made within the Institute and Faculty of Actuaries (IFoA) paper, building on the Pensions and Lifetime Savings Association’s (PLSA)  Retirement Living Standards research. This calculated that those on average incomes living in London need to be setting aside £1,090 per month to afford a ‘moderate retirement lifestyle’ from State Pension age. The new Dunstan Thomas study carried out in November, found that only seven per cent of all London-based Gen Xers are currently putting in more than £1,000 per month into their pensions.

According to the IFoA study, Londoners will need to budget at least £24,100 per year if they plan to stay living in the capital and enjoy a moderate retirement lifestyle.  The study also uncovered that London-based Gen Xers were on average earning more than Gen Xers living in all other regions of the UK and were putting more into their pensions each month than any other region.

However, they are only the fifth most generous contributors to their pension if measured by the percentage of salary that they put into their pension – they average pension contributions equivalent to  just 7.8 per cent of salary. Working Gen Xer’s living in West Midlands put in 7.9 per cent of their income. Residents in the Southeast put in 8 per cent, East of England – 8.7 per cent and Northern Ireland put in the most by percentage of salary at 10.1 per cent.

Gen Xers living in London hold other investments and savings worth, on average, £138,021 – nearly double the national average value of non-pension investments of this age group (amongst those who have savings and investments) of £71,591.

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). And in London, 12 per cent of Gen Xers hold B2L properties, double the national average of six per cent. For example, 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 £5,000 a month after tax, have at least one B2L property to their name.

Nearly one in every ten (nine per cent) Londoners aged 39-54 hold individual listed shares as an investment, whereas the national average is only five per cent.

Nearly a quarter (24 per cent) of Londoners in this age group think they will have enough in pensions and other savings and investments to afford the retirement lifestyle they would like; whereas nationwide just 18 per cent think they are saving enough to retire comfortably. Londoners aged 39-54 would like to retire aged 63 but think it’s more likely that they will retire fully by age 66, only marginally below the national average of 66.5 years old. A massive 38 per cent of Londoners are unsure whether they will ever be able to fully retire ever. Nationally, 40 per cent of Gen Xers think this.

London-based Gen Xers’ pension savings were heavily impacted by the Great Recession from 2008-2013. During this period 11 per cent of them put their retirement saving ‘on hold during all or nearly all of that period’, against a national average of nine per cent. A further 20 per cent of Londoners saw a moderately negative impact on their pension savings activity during the Great Recession as against a national average of 14 per cent seeing a moderate impact.

And Gen X Londoners appear to be nearly twice as interested in buying investments which have good environmental, social and governance (ESG) ratings. ESG means that investment managers and now pension funds have to meet minimum standards in how they monitor and manage the environmental and social impacts of their investments. Nearly a third (31 per cent) of London-based Gen Xers agreed with the statement ‘Environmental and Social Impact (in my investments) matters a lot more than it did two years ago’; nearly twice the 18 per cent who agreed with this statement nationwide.

Adrian Boulding, Director of Retirement Strategy at Dunstan Thomas commented on these findings: “It’s clear from this study, that although Londoners tend to earn more and definitely save more into pensions and other investments, it’s still not enough for most of them to retire comfortably in their 60s.

“In addition, our regional analysis tells us that by percentage of salary, London Gen Xers are the in fact the fifth largest pensions contributor. Only seven per cent of them are putting in more than £1,000 per month which is roughly what the IFoA PLSA Retirement Living Standards study recommends for building a pot big enough for Londoners to fund a moderate retirement lifestyle from State Pension age. It’s not too late for Generation Xers to act to improve their retirement savings prospects but they do need to act now to draw up a plan.”

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