Generation A may not have been in the workplace long, but it has already faced a disproportionate number of financial blows. From not being able to afford to buy a home, to insecure job prospects, to student debt, they seem to have drawn the short straw on everything. On top of this, they are already learning they are going to have to take some very real responsibility for their future financial comfort. Pensions are becoming increasingly DIY, with even auto-enrolment not enough to prevent poverty later on in life.
At the same time, at the other end of the age spectrum, pensioners have, to paraphrase Harold Wilson, “never had it so good”. The triple-lock on pensions and numerous benefits for the over 65s such as fuel allowance and free bus passes have created a situation, where for the first time ever, the average disposable income of pensioners is actually higher than that of working people. Additionally, their well-established (and well-documented) voting power and effective lobbying groups such as Saga have made successive governments reluctant to look into this issue in any detail.
It is therefore heartening that the Work and Pensions committee has decided to take a closer look. It has just announced an intergenerational fairness inquiry, which will look at whether “the current generation of people in or approaching retirement will over the course of their lifetimes have enjoyed and accumulated much more housing and financial wealth, public service usage, and welfare and pension entitlements than more recent generations can hope to receive”. It is particularly keen to explore whether this is sustainable, how much of a welfare issue this is, and how necessary the triple lock on pensions actually is to prevent poverty amongst pensioners. So what can they expect to find out?
The difficulty with this type of inquiry is that you are looking at it from a necessarily relative point of view. The world nowadays is clearly very different to the one in which the older generation grew up. Many began their working lives on low salaries, they were fairly certain that this would rise substantially as they progressed in their careers, with a DC pension to see them through their old age. Equally, house prices weren’t kept artificially high like they are nowadays by factors such as inflation and demand and supply issues caused by rising populations and lack of suitable and affordable housing. Despite reports to the contrary, this shows no sign of slowing, with the latest data from Hometrack revealing that house prices last month grew at their highest rate since September 2014. For those that went to university in those days, debt wasn’t an issue and they could rest assured that none of their salary would have to go to repaying a student loan of up to £15,000. For those in more desperate need, welfare was available for those under 21 – the recent cuts have meant it is more cost-effective for many to remain under their parents’ roof.
Times may be difficult for many young people now, and while this is unfair, there are unprecedented opportunities for this age group to really get to grips with financial management. Tech firms out there, such as Wealth Horizon, provide low-cost investment solutions for as little as £50 a month, helping young people get into good habits. Misselling scandals and their repercussions have also made financial products much more aligned to the interests of customers, which bodes well for future generations. The relentless rise of social media has made it easier for young people, many of whom are digital natives, to have their voices heard by politicians, multi-national firms and an array of policymakers, and in real-time. We are seeing increasing trends towards young people’s ‘champions’ – the Mayor of London appointed one recently. Equally, the likes of Generation Rent and of course the Intergenerational Foundation support young people in crucial issues. As a result, we are starting to see more of a ‘voice’ converge.
Of course, many pensioners and those coming up to retirement have faced hardships of their own. The Women Against State Pension Inequality Campaign has just forced a parliamentary debate on the treatment of women born after 1951 who are set to bear the brunt of the age increase to the state pension. Equally, a lot of people who have saved hard all their lives have found their projected incomes have not matched their actual income these last five or so years; the historic lows on interest rates have seen to that. Others have found that means testing has forced them to pay their own care home costs later on, which also has a knock-on effect for their families’ financial wellbeing and even inheritance prospects.
So it’s about striking a balance between protecting pensioners and ensuring they have enough to survive on, while ensuring that younger generations have access to comparable opportunities, in the face of huge demographic and societal change. Equally, indirect costs from ‘running low’ need to be weighed up. For instance, if an older person has to make a choice between heating their home and buying food, this increases the risk of them becoming ill and having to use health services. Keeping people as well and independent as possible, for as long as possible is crucial. The inquiry would do well to take these factors into account.