For the first time in modern history, the middle-aged are no better off than the generation that preceded them
Are you in your 40s, feeling overworked and underpaid, with little chance of things getting better? Maybe every generation of the middle-aged have felt the same way, only to be reminded by their parents or even grandparents that it was much tougher in their day. But evidence is now emerging that today's middle-aged really are, for the first time in modern economic history, no better off than the generation that preceded them.
The reason? Forget the fact that today's "entitled" 40-somethings may see a week's holiday in Spain and an iPhone as a necessity rather than a luxury. Two factors mark them out from the generation that came before: property and pensions. No amount of scrimping on holidays or mobile phones will be enough to pay for the £100,000 needed to move up from a two-bed flat to a three-bed semi in many parts of Britain, let alone find the £500 a month that pension experts tell us we need to put aside every month to fund a decent pension in retirement.
It's telling that 1967 was the year that pensions peaked in Britain. That year, 8.1 million workers in the private sector saw money put in to a pension scheme by their employer. Mostly, the money went into final salary-based schemes, which have paid out generously to those in retirement today. By 2012, the number of private sector workers with decent pensions had collapsed. Only 2.7 million had employers paying into a scheme in 2012, the latest year the Office of National Statistics has data on.
What's more, most of these workers are in substandard "defined contribution" schemes which rely, rather riskily, on the stockmarket for returns, and which have to be converted into what is probably the most hated financial product in Britain today, an annuity. Just four of the 100 companies that make up the FTSE 100 index still have a final salary pension scheme open to new employees (it may come as a surprise that Tesco is one of them).
Auto-enrolment is a success, with 2 million joining schemes said the Pensions Regulator yesterday, but with contributions so low, the payouts will be nothing like those enjoyed by today's pensioners.
Property is the other factor that separates the generation born in the 1950s to those born in the 1970s and 1980s. When Halifax started its price index in 1983, the average cost of a home in Britain was £29,696, while last month it was £174,910. In real terms, prices have nearly doubled, moving from just over three times typical income to just under five times. An earlier generation needed one salary to finance a home purchase, today's generation need two. Unsurprisingly, home ownership has gone into reverse gear, in the capital especially so.
It may explain the puzzle the Institute for Fiscal Studies leaves unanswered in its analysis. It found that recent generations have earned more, but saved less. Did the "me" generation born in the 1970s abandon prudence in favour of consumerism? Maybe. But we've also witnessed since the 1970s the frightening rise in inequality, loss of job security, de-unionisation, deindustrialisation, reduced social mobility and the challenges posed by globalisation.
Small wonder it's so tempting to sit back, pop in your iPhone headphones, and enjoy a cheap Ryanair flight to Barcelona, leaving behind the receding prospect of ever being able to personally finance a decent pension or house purchase. Reported by guardian.co.uk 3 hours ago.
Are you in your 40s, feeling overworked and underpaid, with little chance of things getting better? Maybe every generation of the middle-aged have felt the same way, only to be reminded by their parents or even grandparents that it was much tougher in their day. But evidence is now emerging that today's middle-aged really are, for the first time in modern economic history, no better off than the generation that preceded them.
The reason? Forget the fact that today's "entitled" 40-somethings may see a week's holiday in Spain and an iPhone as a necessity rather than a luxury. Two factors mark them out from the generation that came before: property and pensions. No amount of scrimping on holidays or mobile phones will be enough to pay for the £100,000 needed to move up from a two-bed flat to a three-bed semi in many parts of Britain, let alone find the £500 a month that pension experts tell us we need to put aside every month to fund a decent pension in retirement.
It's telling that 1967 was the year that pensions peaked in Britain. That year, 8.1 million workers in the private sector saw money put in to a pension scheme by their employer. Mostly, the money went into final salary-based schemes, which have paid out generously to those in retirement today. By 2012, the number of private sector workers with decent pensions had collapsed. Only 2.7 million had employers paying into a scheme in 2012, the latest year the Office of National Statistics has data on.
What's more, most of these workers are in substandard "defined contribution" schemes which rely, rather riskily, on the stockmarket for returns, and which have to be converted into what is probably the most hated financial product in Britain today, an annuity. Just four of the 100 companies that make up the FTSE 100 index still have a final salary pension scheme open to new employees (it may come as a surprise that Tesco is one of them).
Auto-enrolment is a success, with 2 million joining schemes said the Pensions Regulator yesterday, but with contributions so low, the payouts will be nothing like those enjoyed by today's pensioners.
Property is the other factor that separates the generation born in the 1950s to those born in the 1970s and 1980s. When Halifax started its price index in 1983, the average cost of a home in Britain was £29,696, while last month it was £174,910. In real terms, prices have nearly doubled, moving from just over three times typical income to just under five times. An earlier generation needed one salary to finance a home purchase, today's generation need two. Unsurprisingly, home ownership has gone into reverse gear, in the capital especially so.
It may explain the puzzle the Institute for Fiscal Studies leaves unanswered in its analysis. It found that recent generations have earned more, but saved less. Did the "me" generation born in the 1970s abandon prudence in favour of consumerism? Maybe. But we've also witnessed since the 1970s the frightening rise in inequality, loss of job security, de-unionisation, deindustrialisation, reduced social mobility and the challenges posed by globalisation.
Small wonder it's so tempting to sit back, pop in your iPhone headphones, and enjoy a cheap Ryanair flight to Barcelona, leaving behind the receding prospect of ever being able to personally finance a decent pension or house purchase. Reported by guardian.co.uk 3 hours ago.