Over half of Baby Boomers are expected to miss their retirement targets - discover these 3 strategies to regain financial stability in your golden years.
UK Baby Boomers with defined benefit (DB) pensions are significantly better prepared for retirement than those relying primarily on defined contribution (DC) pensions. According to a report by Vanguard, about 69% of Baby Boomers with DB pensions are on track to meet their retirement savings goals, compared to only about 28% of those without DB pensions[1][2][4].
The advantages of DB pensions are clear. They provide more predictable and often more stable retirement income since benefits are usually based on salary and years of service, whereas DC pensions depend on investment performance and personal contributions, which can be uncertain and market-dependent[1][2]. Office for National Statistics data show that 65% of those in their 60s have wealth in DB schemes, while only 25% have wealth in DC schemes—reflecting historical reliance on DB plans for Baby Boomers; DC plans became more widespread only after auto-enrolment started in 2012[1].
Having a DB scheme was linked to being more than twice as likely to meet retirement income replacement targets, with the strongest retirement readiness advantage for middle-income savers, for whom DC pensions are less effective alone[2]. Half of UK Baby Boomers are expected to fall short of achieving an adequate retirement income, driven largely by those relying on DC pensions and state pensions, who face more uncertainty and often inadequate savings[1][4].
Middle-income Boomers (earning roughly £32,000–£46,000) are particularly at risk with DC pensions, with only about 40% expected to meet their retirement needs, highlighting the relative security DB pensions offer[3][4].
Georgina Yarwood, senior investment strategy analyst at Vanguard Europe, finds it concerning that half of UK Baby Boomers aren't on track to meet their retirement goals[2]. However, there are ways to boost your pension savings. Leveraging home equity through downsizing, relocating to a lower-cost area, or equity release can unlock additional funds to reduce or eliminate the retirement spending gap[5]. Retirement readiness also depends greatly on the spending goal in mind, and reducing the annual spending goal by 10% can significantly improve retirement readiness[5].
Delaying retirement or taking a phased approach can enhance financial security and improve retirement readiness. The Pensions and Lifetime Savings Association's (PLSA) Retirement Income Standards is a measure used to determine retirement savings[5]. For those expecting to receive DB income, it will make up approximately half of their projected retirement income.
In summary, defined benefit pensions have played a critical role in improving the retirement readiness of UK Baby Boomers, providing a solid income foundation that many DC pension schemes have yet to replicate. Those with DB pensions are far more likely to retire with sufficient income, whereas DC pension holders face greater risk of shortfall, especially among middle-income individuals[1][2][4].
- Savings from downsizing, relocating, or equity release can be used to boost pension savings, improving the retirement readiness of those who might fall short of their goals.
- Middle-income savers relying on DC pensions alone may find it challenging to meet their retirement savings goals, while those with DB pensions have a stronger retirement readiness advantage.
