People born in 1960s-70s 'poorer' than previous generation
People born in the 1960s and 1970s will only be wealthier than the
previous generation in retirement if they inherit money, the Institute
for Fiscal Studies (IFS) has said.
The think tank found people in their 40s and 50s are less likely to
own a home than those 10 years older. Their incomes are also no higher
and their private pensions are smaller.
It suggested an end to the steadily rising incomes and living
standards since World War Two. The IFS analysed the economic
circumstances of individuals born between the 1940s and the 1970s. The
only area in which they will be better off than the previous generation
is that they are more likely to inherit wealth, with about 70% of those
born in the late 1970s expecting to receive an inheritance, compared
with 28% of those born in the early 1940s, the IFS said.
While they are more likely to inherit, the benefits will not be
evenly spread, with those who are the wealthiest likely to receive the
most. The IFS found that the incomes of working-age adults were no
higher in real terms than those of the generation born a decade earlier.
While those born in the '60s and '70s did earn higher incomes when
they were younger, they spent lavishly, and so do not have more money
saved than the generation before them. The end of final salary pension
schemes means they will suffer in comparison to the previous generation
and when they claim the state pension it will make up a smaller
proportion of their previous earnings.
Rising property prices have made it harder to get on the housing
ladder, with home ownership among the '60s and '70s generation falling
to about two-thirds, compared with a peak of four-fifths among those
born in the 1940s and 1950s, the report said.
One of the author's of the study, Andrew Hood, said, "Since the
Second World War, successive generations have enjoyed higher incomes and
living standards than their parents. Yet the incomes and wealth of those
born in the 1960s and 1970s look no higher than those who came before
them."
"As a result, younger generations are likely to have to rely on
inheritances to be better off in retirement than their predecessors.
But inheritances are unequally distributed, with households that are
already relatively wealthy far more likely to benefit," he said. A
government spokesman said it was "committed to protecting pensioners",
citing the protection of benefits such as free bus passes and TV
licences. "We are reforming the UK's state pension system to be more
sustainable for the future and widening access to a workplace pension.
These combined reforms will improve the incomes of nine million people
currently facing inadequate income in retirement," he said.
BBC
|