Many Baby Boomers are fortunate to have both their own property and a decent pension. Meanwhile younger generations look to be finding life tougher, hampered by high house prices and modest wage increases. But is the truth more complicated?
Our society is more aware of our generational differences than ever before. In terms of wealth, the last ten years have opened up a generation gap. People are living – and drawing pensions – for longer. And we’ve seen a dramatic decline in the number of young first-time buyers; more than one million people who would have bought houses in previous generations have rented instead.
Final salary pensions, high house-price growth and periods of economic growth have all worked in the favour of the Baby Boomer generation, who now enjoy substantial assets and property. Many in this group are retired or soon-to-be retired, have paid off their mortgages and built up their savings and are now living off large private pensions. They account for an increasing proportion of consumer spend, especially in the travel and leisure industries. With time and money to spend as they wish, they are a gifted generation.
By contrast, those currently in their 20s and early 30s – the so-called Generation Y, or Millennials – are faced with high property prices, slow wage growth, student loan repayments and the continuing cost of renting. This is the jilted generation, and the challenges it faces are of such an extreme that a government enquiry into generational differences in opportunity is underway.
The pension problem
When the current younger population gets older they will not represent the same market for goods and services, in financial services or elsewhere. Today, a couple in their 60s may enjoy a financially secure retirement having had average salaries, largely because they could trade up in the housing market and accumulate large amounts of equity, then take early retirement on final-salary index-linked pensions, boosted by outright home ownership. It’s very unlikely that their equivalents will be in the same position in 15 or 20 years’ time.
An article published by The Guardian claims that: “Millennials are picking up the tab for the western world’s most stunning accounting disaster to date. No one expected people to live as long as they are, and in such great numbers. Pensions that were promised in the past, and seemed ordinary at the time, are now onerously over-generous, and that is hurting young adults today.”
But generalisations are just that – nothing more. While some Baby Boomers may indeed have ‘had it all’, it’s unfair and divisive to picture the generation as pampered and selfish. In fact, many are eschewing that luxury cruise trip to help fund adult children, as well as the care of elderly parents.
‘The Bank of Mum and Dad’ has become a cliché for a reason: parents have always, to a certain extent, been on hand to help finance the lifestyles of their adult offspring. But in the last few years, it’s become more than that. We’ve seen a notable increase in inter-generational handouts – parents, grandparents, aunts and uncles giving a lump sum here, an interest-free loan there.
While it’s difficult to track which families and individuals are giving and receiving handouts, it’s a trend the industry needs to bear in mind – and one that looks set to continue.
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