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This generation poorer than the last

This generation poorer than the last

Category: Retirement

Updated: 18/12/2013
First Published: 18/12/2013

MONEYFACTS ARCHIVE
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According to the Institute of Fiscal Studies (IFS), those born in the 1960s and 70s will only be wealthier than the previous generation if they inherit money – meaning it's the first time in several decades that people will be poorer than their parents.

The research found that those currently in their 40s and 50s are less likely to own their home than people 10 years older than them. At the same time, their incomes (in real terms) are no bigger than the previous generation while their private pensions are markedly smaller, suggesting an end to the steadily rising living standards witnessed since World War Two.

The only area which offers some positivity is that this generation is more likely to inherit money – 70% of those born in the late 1970s expect to receive inheritance compared to just 28% of those born in the early 1940s – although those who are already wealthy stand to benefit most.

The reason for this decline in overall incomes and living standards is down to several factors. Those in their 40s and 50s are thought to have spent more when they were younger, resulting in fewer having suitable savings today, while the end of final salary pension schemes will mean they'll be hit harder in retirement.

Meanwhile, the rising cost of housing has meant it's much harder to get on the property ladder, with home ownership levels of those born in the 1960s and 70s falling to about two-thirds – compared to the four-fifths of those born in the 1940s and 50s.

The figures are particularly worrying when it comes to retirement, with many working-age adults facing a clear retirement shortfall thanks to a combination of reduced pensions (both state and private) as well as a distinct lack of savings.

Even though the UK pensions system is currently in a period of reform, with auto-enrolment being introduced and a move to a single-tier state pension, it's important for the current generation of workers to be prepared to ensure they've got a suitable income in retirement – ideally by contributing to a workplace pension (and preferably a private one too) and having a suitable savings account in place.

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