By Maximilian Clarke
Record high personal debt, along with pension insecurity, are the prices the youth of today pay in exchange for a higher life expectancy, a new report finds.
The report, ‘How will the wealth of the baby bust generation compare with that of the baby boomers?’, was compiled by PwC. It reveals marked differences in the economic fortunes of people with similar career paths and life histories from different generations. It says that, relative to average earnings in society at the time, the baby buster generation could be around 25% less wealthy at age 65 than the baby boomers in terms of total accumulated housing, pension and other financial wealth.
The report looks at the lives of two hypothetical people, the first born in 1963, the second in 1993. They have very similar careers as NHS doctors and make very similar life choices in relation to marriage and children, but accumulate very different levels of lifetime housing, pension and other financial wealth.
“Our report shows that, relative to living standards in society at the time, the baby buster generation may end up being up to 25% worse off than their parents’ generation in terms of accumulated total wealth at age 65 - even if the volume and variety of goods and services available to the baby busters is greater than for earlier generations due to being born into a richer society with more advanced technologies,” commented John Hawksworth, PwC chief economist and co-author of the report.
At age 65, the baby buster’s total wealth is projected to be higher, in absolute terms, at around £1.9 million, compared with the baby boomer’s at around £1.6 million. However, this simply reflects projected real growth in the economy between 2028 and 2058: relative to average earnings in society at those two dates, the baby buster’s comparative wealth is projected to be around 25% lower than that of the baby boomer.
“There is no doubt that times are changing for the next generation. Getting a foot on the housing ladder is a distant dream for many, and is set to become even more so for the baby busters born in the early 1990s, who face leaving university with significant debt,” added Rosalind Rowe, partner in PwC’s real estate practice.
“Even with a well-paid job, the reality of life ahead is that paying down the debt will make saving for a deposit so difficult that it will be almost impossible for them to think about buying a property for many years, if not decades. They may be ‘Generation Rent’ for much longer than they expect.”
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