The baby boomer generation own more than half of Britain’s £11 trillion of wealth while younger generations are missing out, a new report finds.
A new report by the Resolution Foundation has revealed a pensions windfall and the housing boom of the 1990s and 2000s has accelerated wealth inequality between generations.
Data released by the think tank says a wealth chasm has now opened up between old and young, and director Torsten Bell is calling for change.
He said: “Too often our public debates ignore the huge and very unequally shared wealth of our nation. We need to better understand the scale and causes of 21st Century wealth gaps, not only between rich and poor but between different generations, if we are to ensure we fairly address the challenges Britain faces in the years ahead.
“We can start by recognising that today’s young are not accumulating wealth at anything like the rate of older generations. This isn’t because they save less, but because of the bad luck of being born too late, and our collective failure on big policy areas from housing to pensions. It’s time we all took responsibility for putting that right.”
The report shows in detail how those born between 1946 and 1950 are sitting on a fifth more wealth at age 65 than the cohort born just five years before.
Those born in the late 1950s – now approaching retirement – had 7% less wealth at the age of 55 than those born five years earlier did at the same age.
But the wealth gap grows greater still for younger generations.
The typical wealth at age 40 for someone born in the early 1970s was £25,000 (or 28%) less than someone born five years earlier. And the oldest millennial cohort (born in the early 1980s) had half as much wealth at age 30 as those born five years earlier did at that age.
The Resolution Foundation believes the housing boom of the 1990s and 2000s was a key driver for baby boomers’ wealth as home-owners flourished.
The report shows 82% of housing wealth increases between 1993 and 2012-14 were due to owning homes, with the gains amounting to a staggering £2.3tn wealth windfall, with one in six home-owners earning more from their homes than their jobs.
Those born in the 1940s and 1950s were the main beneficiaries as they were most likely to be home owners at the start of the property boom.
Now, in the wake of the property bubble, younger people have been priced out of home ownership and the Resolution Foundation says every cohort born from the 1950s onwards has less property wealth than those born a decade earlier.
Pensions and benefits are also a source of wealth inequality between generations, the report finds.
It says three-quarters (74%) of the gains in private pension wealth since 2006-08 amount to a £800bn ‘pensions wealth windfall’ with baby boomers again more likely to benefit.
Laura Gardiner, senior policy analyst at the Resolution Foundation, said: “Britain’s pre-crash property boom created a huge, unearned and largely tax-free £2.3tn housing wealth windfall for those old enough and lucky enough to be home owners at the time. But while the property bubble hugely benefited many of Britain’s baby boomers, it has also driven generational wealth progress into reverse by pricing younger people out of home ownership.
“Property, pension and financial wealth can provide security and opportunities for families, as well as a decent income in retirement. The failure of younger generations to accumulate wealth in the way that earlier generations have been able to is therefore a huge living standards concern for us all.”