A recent BBC report has stated that today’s young will never be as rich as previous generations.
Despite the recent financial crisis between 2006- 2012, households actually appeared to grow richer. However, the reason for the reported growth was largely due to an increase in pension values during this period. Households aged 45-54 were the ones that saw the biggest increase in pension values, with the average pension wealth standing at £38,000.
Despite the average household value increasing, young households aged 25-34 are not expected to share the same experience. The slow rate of growth in overall wealth means that the younger generations will remain less wealthy than their parents unless they buckle down and save from an early age.
Households aged 25-34 are unlikely to retire until the age of 75, much later than previous generations. With retirement age further into the future and pension values decreasing, pensions are unlikely to have an impact on household value and growth. Unlike the middle-aged generation, the millennials and generations thereafter must approach the concept of saving much more seriously.
One third of 25-34 year old’s believe that their pension will be their largest source of income after retirement, which will prove to be a wild misjudgement on their part. In contrast, 24% aren’t expecting to receive any income from state-pension. Despite these statistics, only 10% actively save for their future retirement. Instead, 30% save for unexpected expenses, whilst 23% save for holiday’s and leisure activities. The saving habits of the young are likely to hinder their wealth in the future.
As the younger generations can’t rely on state-pensions and won’t enjoy final salary pay-outs, they must start to plan their retirement much earlier. With 53% of 25-34 year old’s not even paying into their workplace pension scheme, they are very unlikely to experience the same amount of wealth as their parents.