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Post baby boomer savers need to sacrifice more take-home pay for retirement

10 April 2019

The ‘good times’ of rapidly rising retirement incomes may be coming to an end.

It follows the latest retirement income figures from the Department for Work and Pensions which showed that average weekly income for all pensioners was £304 in 2017/18, almost twice the £161 recorded in 1994/95, but down from £317 in 2016/17.

Benefit income, including the state pension, is the single biggest component, accounting for 59% of income for single pensioners and 35% for couples.

Interestingly, older pensioners aged 75 or over have on average £82 a week more in retirement income than younger generations.

According to AJ Bell, while auto-enrolment has boosted pension coverage, the scaling back of state pension and the demise of defined benefit pensions have left younger savers at risk of lower retirement incomes than their parents.

Tom Selby, senior analyst, AJ Bell, said: “The last of the Baby Boomers are now approaching retirement, with many lucky enough to have built up generous defined benefit entitlements. Those who have already retired have also enjoyed boosts in the value of their state pension since 2010 through the triple-lock.

“The next generation, on the other hand, will likely experience a scaling back in state pension provision, with DB now almost exclusively the preserve of the public sector. The scale of this shift in society is hard to overstate. Workers will be required to sacrifice more of their income today to provide a decent retirement later in life, or face working into their 70s of even beyond.”

Selby said anyone who wants to enjoy the same retirement as Baby Boomers will “need to take responsibility themselves”, saving more from an earlier age and making the most of the incentives on offer.

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