10th December 2015
Since the global financial crisis the share of wealth enjoyed by the newly retired has overtaken that held by under 45s, claims a new report from the Resolution Foundation.
The analysis by David Willetts, executive chair of the organisation shows that the amount of total wealth held households headed by someone aged under 45 fell from 20% in the years approaching the recession, to 16% in 2010-12.
As a result, households led by someone aged 65-74 now hold more wealth, despite there being more than twice as many households headed by someone aged 16-44.
Recent retirees’ now account for almost a fifth, at 19% of the UK’s total household wealth, even though they make up a mere 14% of all households the report said.
Willetts urged that the “stark generational wealth divide has grown since the financial crash”, as a result of the recently retired being relatively protected in a downturn where house prices had a swift recovery, while real wages took six years to start increasing again. He also found that the over 60s were least affected by the UK’s pay squeeze.
However, some older households are still likely to face problems in retirement, with one in seven having less than £50,000 in household wealth. This shows that older households are not universally doing better than younger ones, said the Resolution Foundation.
The study also looked at the components of wealth for the different age groups before and towards the end of the downturn.
Approaching the recession in 2006-08, households aged 16-44 held 22% of property wealth in the UK, dropping to 17% in 2010-12. This compares with the recently retired – a considerably smaller group – which held 17% of UK property wealth in 2006-08, rising to 20% in 2010-12.
This in part reflects falling home ownership rates for younger households, says the Foundation.
Willetts said: “There has been a long-term shift in the share of household wealth across the UK, which has been accelerated by the recent financial crash and subsequent downturn. The wealth of recently retired households has now overtaken that of the larger group of households headed by someone under 45 years old.
“However the notion that all pensioners are doing well financially is false, with one in seven having less than £50,000 in wealth to draw upon through their retirement. I do not believe that this shift is creating an intergenerational conflict.
“What we see instead is a considerable transfer of wealth from recent retirees down to their children and grandchildren, for instance by helping them to get on the property ladder.”
Willetts however cautioned that the UK cannot rely on families alone to offset inter-generational inequalities, particularly if the state transfers wealth in the opposite direction. “Such a pattern has serious implications for social mobility,” he added.
“To ensure that younger households enjoy the same wealth in older age as recently retired households, we need to see a relentless focus on productivity to get wages growing at a healthier rate.
“There is also an urgent need for action to boost housing supply, and for government to take a far deeper look at the inter-generational implications of its public spending priorities.”