More than half of Generation X are heading for inadequate retirement incomes, with 7.5 million people facing a potential “pension shock” when they retire, the Social Market Foundation (SMF) has warned.

The report found that 54 per cent of Gen X - those born between 1965 and 1980 - were projected to have retirement incomes below what is needed to maintain their current standard of living or meet basic living costs.

The research, based on a survey of more than 2,000 Gen Xers conducted by Survation and sponsored by the Standard Life Centre for the Future of Retirement, also suggested that many in the cohort were unaware of the scale of the shortfall.

Indeed, half of the respondents said they expected to receive a higher income in retirement than projections suggested, while 57 per cent said they did not regularly think about what their retirement might cost, and just 11 per cent had sought financial advice.

Overall, 39 per cent of Gen X were projected to fall short of maintaining their current standard of living in retirement, and 35 per cent could fall below minimum retirement living standards.

Meanwhile, the report also highlighted that around two million Gen Xers - 15 per cent of the cohort - had no housing equity or investments to fall back on.

When presented with projections of their likely retirement finances, 16 per cent of respondents said they would consider cutting spending on essentials such as food, energy and transport to increase their pension savings.

SMF chief economist, Gideon Salutin, explained that many in Gen X were caught between two pension systems, having been too young to benefit fully from generous defined benefit (DB) schemes but too old to build up significant savings through automatic enrolment, which was introduced in 2012.

“This generation now approaching retirement forms a slow-moving avalanche," he warned.

"Millions are heading for a retirement without the income they expect. Without action, their retirements will be meagre.

“Despite many of them working longer than their parents and making more money than their parents, Gen X is in for a substantially worse retirement.”

Salutin noted that the issue could become increasingly politically significant as the generation approached retirement age.

The research suggested that pension insecurity could affect more than 40 per cent of the Gen X voting bloc across all major political parties, with Reform voters the most exposed to potential “pension shock” (55 per cent), followed by Green voters (53 per cent).

The findings also highlighted regional disparities, with nearly half (49 per cent) of Gen X in the North East projected to fall below minimum retirement living standards, compared with 26 per cent in the South East.

Women, renters, those who have divorced, people with long-term health conditions and ethnic minority groups were also found to be more likely to face inadequate retirement incomes.

Standard Life Centre for the Future of Retirement director, Catherine Foot, stated that the findings showed Gen X were “at the sharp end of a building retirement crisis”.

“While today’s retirees are better off than previous generations, this trend is set to go into reverse within the next decade and into the 2040s,” she continued.

“There is a relatively short window now in which to act, and two key enablers for Gen X will be pension dashboards that help people get a clear picture of the outcome they’re on track for and policies designed to support longer working lives, which leads to greater financial security.”

The report urged policymakers to consider a range of reforms to improve retirement outcomes, including increasing default auto-enrolment contributions to 12 per cent, expanding access to the Lifelong Learning Entitlement and widening the MoneyHelper Pension Wise programme so that all of Gen X could access financial guidance.

Salutin added that the upcoming Pensions Commission review provided a key opportunity to address the issue.

“Action is urgently needed,” he said. “The Pensions Commission provides a perfect opportunity for change, but time is running out for Gen X.”

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