A new report following a study conducted by the Institute of Fiscal Studies (IFS) has shown that this generation ‘s young people will be poorer than their parents throughout their entire lives.
“Working-age households are at risk of being less wealthy at each age than those born a decade earlier” said the IFS ‘ Dave Innes, one of the report ‘s authors.
This, added to the steadily rising property prices mean that younger generations look to be both poorer in real terms, and almost totally unable to afford a house without a significant amount of cash to put up for a deposit for a mortgage.
The report showed that since the financial crash of 2007-08, we have seen an increase in average household wealth but despite this, growth is slowing, and the likelihood is that our young people will still be financially lagging behind those born in previous generations.
Pension values increased rather significantly between 2006 and 2012, having a positive effect on average household wealth. “Household wealth on average increased in real terms over the late 2000s, driven by increases in private pension entitlements” said Mr Innes.
The most dramatic increase over that period was seen in households that were aged between 45 and 54. Among these, around a quarter reported that their wealth had gone down by over £69,000, while another quarter saw increases of over £138,000. It is precisely the increase in private pension entitlements that Innes referred that that had this effect.
Pension news was good for that particular demographic, but the study also showed that attitudes towards post-retirement incomes among the younger generations were interestingly varied. 24% of households aged between 25 and 34 said that they expected no state pension income whatsoever once they retired, while closer to 30% though that it would, conversely, be their main form of income once they ‘d finished working.
Another recent study showed that increasing numbers of people (from various demographics) felt that property would be a significant source of post-retirement income, though some analysts have issued warnings to those who feel that buying and selling property is some simple, magic way of boosting income akin to printing money.
Young people ‘s thoughts and plans with regard to savings were also investigated, with almost a third claiming that they are currently saving in case of some kind of unexpected future expense. Only 10% said they were saving in order to provide themselves with income after they retire and the same percentage were saving for someone else.
While 24% believed that they would receive no state pension whatsoever, a staggering 44% believed that they would receive nothing from a private pension either. This despite the recently introduced legislation that means that all workers will be enrolled automatically in pension schemes at their place of work.
Rowena Crawford, another of the report ‘s authors, commented on this, saying that “it is striking how many individuals do not expect private pensions to have a role in financing their retirement, let alone be their main source of income.
“It will be interesting,” she went on, “to see how these attitudes change as auto enrolment into workplace pensions is rolled out.”