The minimum income standard (MIS) in 2016 as defined by the Joseph Rowntree Foundation equates to just £9,500.  Unfortunately, 1.6 million people out of the 25.5 million in the workforce are at high risk of falling short of this minimum income standard in retirement. 

The Pensions and Lifetime Savings Association (PLSA) recently did an analysis of the incomes of different UK generations and what they can expect in retirement. The Retirement Income Adequacy: Generation by Generation report found that well over 13 million people are still considered at risk of not meeting their target replacement rate, or TRR. 

Millennials:  This generation is considered the auto-enrolment generation.  Millennials are actually the first generation to experience the UK pensions system the way that reforms intended it to be.  Unfortunately for Millennials, those in a defined contribution scheme will need to do more than just that to achieve their TRR.  They will need to contributmore than the minimum and probably work longer.

Gen X:  This is the generation that falls in the middle of all of the reforms.  They are witnessing the slow decline of defined benefit schemes and the introduction of auto-enrolment.  Many people in Gen X didn’t start saving in their pension early on and are now saving at a lower level via auto-enrolment.  Just an increase in contributions is definitely not enough to achieve TRR.  They may need to dip into assets like property to generate a higher retirement income.

Baby Boomers: This generation is split.  Baby Boomers who have accrued defined benefit pension entitlement have great retirement income prospects.  Those on the flip side, though, are facing grim conditions. Any Baby Boomer who does not have a defined benefit scheme could enter retirement with less than 10 years of savings through auto-enrolment and will probably end up depending on State Pension.  This generation, however, is synonymous with property wealth which may be enough to generate a comfortable retirement.