People in their early 30s are half as wealthy as those now in their 40s were at the same age, a report finds.
Today’s 30-something generation has missed out on house price increases and better pensions, according to research by the Institute for Fiscal Studies.
Those born in the early 1980s have an average wealth of £27,000 each, against the £53,000 those born in the 1970s had by the same age, said the IFS.
They will also find it harder to amass wealth in the future, it added.
The think tank found that people born in the early 1980s were the first post-war group not to have higher incomes in early adulthood than those born in the preceding decade.
“This is partly the result of the overall stagnation of working-age incomes,” it said. “But it also reflects the fact that the great recession hit the pay and employment of young adults the hardest.”
‘It’s a vicious cycle’
Jessica Lucas, 27
A lot of my friends can’t find a way to get a deposit for a house. A lot of them are struggling – working full time, sometimes working two jobs – and that’s just to rent.
Renting alone is causing us a lot of trouble to save up for a house, so I don’t know how we’re going to get out of the vicious cycle of renting to then own.
Adam Snape, 36
For pretty much everyone I know around my age it’s hard to get a house. Everyone was spending on credit cards that were limitless and people could get another one and another one.
People didn’t think they needed a plan really.
What is the norm now is renting. It’s getting a lot more like Europe. It’s becoming a bit of a daydream that people can buy a house.
In addition, the study found that at the age of 30 only 40% owned their own home, compared with at least 55% of people born in the previous post-war decades.
“It looks like those born in the early 1980s are likely to find it harder than their predecessors to build up wealth in housing and pensions as they age,” said report author Andrew Hood.
“They have much lower home-ownership rates in early adulthood than any other post-war cohort, and – outside the public sector – have much less access to generous defined benefit pension schemes than previous generations did at the same age.”
The IFS looked at housing, financial and private pension wealth for its study.
By Simon Gompertz, personal finance correspondent
It’s no surprise to those in their 30s, born in the early 1980s, who’ve struggled to buy a home, while paying high rents and trying to put something aside for a pension, that their generation has fallen behind.
The stark numbers are that their average wealth including home, savings and pension, is £27,000 each,
While those only 10 years older had wealth by the same stage in their lives of £53,000.
Fewer stepped on to the housing ladder early on if at all, so they’ve missed out on gains in house prices, and fewer have generous company pensions building up.
Which means that the outlook for this group isn’t promising either.
The squeeze on pay has hit them harder: they’re the first generation since World War Two to have lower incomes than those who came before.
And in old age they’re likely to end up with less to live on.
Commenting on the IFS findings, Campbell Robb, housing charity Shelter’s chief executive, said: “With sky high house prices so out of step with average wages, it’s no wonder a whole generation are being priced out of a home of their own and left with no choice but expensive, unstable private renting.
“At Shelter we see the impact of our chronic shortage of affordable homes every day, with thousands of people forking out most of their income on rent and left living from one paycheque to the next,” he added.
Article source: http://www.bbc.co.uk/news/business-37508968