UK citizens born in the 1960s and ’70s will be the first pensioners since WWII to be worse off than their parents, a study has shown.
The next generation of retirees will have to subsidize their pensions with inheritance to achieve the same quality of life.
The survey carried out by the Institute for Fiscal Studies (IFS) comes off the back of their yearly report which documented the falling standard of living in the UK this year. One of the predominant factors behinds the drop in the quality of retired life is stagnancy of wages following the financial crisis, the study reports.
“The incomes and wealth of those born in the 1960s and ’70s look no higher than the cohorts who came before them. As a result, younger cohorts are likely to have to rely on inheritances to be better off in retirement than their predecessors,” Andrew Hood, one of the authors of the report, told The Guardian.
In addition, those born in the ’60s and ’70s are less likely to own property and will have smaller pensions. They also saw their salaries plateau when their predecessors received large pay increases.
In this way, the study predicts that inheritances are likely to be “unevenly distributed,” favoring the wealthy and increasing the class gap.
“Among those born in the mid-1970s, 35 percent of the wealthiest third expect to receive an inheritance worth at least £100,000, compared with just 12 percent of the least wealthy third,” writes the study.
The less wealthy are likely to see their inheritance curtailed by rising care home costs, which can exceed tens of thousands of pounds a year.
“If you have two parents who spend a number of years needing intensive care home support, that can consume a very significant inheritance before it ever reaches you,” said Tom McPhail, head of pensions research at Hargreaves Lansdown to The Daily Telegraph.
The study’s findings mark an end to the steady increase in quality of life of British citizens since the end of WWII. The IFS’ yearly analysis of the cost of living in the UK revealed that incomes had fallen by $2,600 in real terms since May 2000.
The UK’s two main rival parties both pointed the finger at each other following the publication of the annual document. Conservative Prime Minister David Cameron said the drop was hardly surprising after “the biggest recession in 100 years” which he blamed on the “mess” left by the previous Labour government.
However, Labour leader Ed Miliband has attacked the Conservatives, accusing them of upholding the interests of “the privileged few.”