Analysis of ONS population data shows that in 2010/11, people under 40 made up just over half (50.6%) of the total population but held just £7.53 of every £100 of wealth. A decade later the proportion of under 40s slightly declined to 49.5%, but their share of wealth plummeted to just £3.98.
ILC’s “Financially secure?” briefing, published today, is the first to be released as part of work to develop a new “Longevity White Paper” highlighting the solutions needed to capitalise on the opportunities of an ageing society. The ILC is inviting solutions for addressing income inequalities and supporting people to make savings and access good advice right across our longer lives.
The spectre of growing pensioner poverty has been looming for many years. For example, in 2017 the ILC revealed that, to achieve the same level of retirement income as current retirees, younger people would need to save up to 20% of their earnings each year.
The increase in savings that has come because of auto-enrolment will not be sufficient to close this intergenerational savings gap.
But it is not just younger generations that need to save more. ILC research in 2021 showed that Generation X, who make up one-fifth of the UK’s population, save on average just £200 into their pension pots each month, and one-third of this group is at high risk of retiring with insufficient incomes.
At the same time future generations face additional strains on their finances:
• The number of private renters aged 65 years and above is projected to double by 2046, reaching 12% of all households of this age.
• There are 8.9 million economically inactive adults under 65 in the UK, with over 2.5 million who are long-term sick and others forced to leave the workforce earlier than planned due to caring responsibilities.
David Sinclair, Chief Executive at the International Longevity Centre UK said: “Younger people are already not saving enough to enjoy a decent lifestyle as they age, and our latest analysis shows that younger generations will have even fewer assets available. With the ongoing cost-of-living crisis exerting further pressure on savings, the need for new ideas is clear.
“Pensioner poverty is already a significant issue, and it will grow if we don’t act now. We know that future retirees won’t be able to rely on housing wealth and many will need to spend money on rent into retirement.
“It is crucial that we address these challenges head-on and develop comprehensive strategies to ensure that every generation has the support they need to be financially secure right across their lives.
“We’re pulling together the best minds to come up with new ideas for better lives in an ageing society. We’ll be publishing our thinking in the coming months and urging action for a more hopeful future.”
Aviva is supporting the ILC’s research into longevity, Doug Brown, CEO of Aviva UK & Ireland Life said: “Financial pressures are growing and affecting all generations; however, the youngest workers are in a particularly vulnerable position when it comes to saving for their retirement. With lower overall wealth today than the equivalent generation had a decade ago, this is concerning.
“At the same time, rising cost-of-living pressures are impacting younger workers, making it even more difficult for people to set aside enough money for their retirement.
“It’s clear we need considered and multi-faceted solutions to tackle these intergenerational wealth inequality challenges, so that everyone can realistically aspire to having financial security throughout their lives. Our partnership with the ILC and leading thinkers on demographic issues will help to develop and put forward ideas to improve individuals’ financial wellbeing and futures.”
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