Anyone born after 1960 is likely to face a frugal retirement unless they inherit a large amount of money, according to the latest research.
Children of the 60s and 70s are likely to become the first generation since the end of the Second World War to retire financially worse off than their parents.
This stark message comes from think-tank the Institute for Fiscal Studies (IFS).
A report from the IFS predicts this generation is less likely to own a home, will have smaller pension pots and less savings than their parents.
This means they are more likely to have to rely on an inheritance for life’s luxuries.
Care costs
However, the problem they are likely to face is long-term care costs may eat up their inheritances before they gain them as their parents live longer.
Despite a cap on care payments promised by the government, the limit is likely to be set at around £72,000, which is almost half the price of an average home, according to the latest figures from the Land Registry.
In a reverse of MacMillan’s famous ‘You’ve never had it so good’ slogan from the 50s, the children of the following decades will see rising incomes and improved living standards fall away.
The IFS forecasts that although the generation will earn more than their parents, they will also spend more on maintaining their day-to-day lifestyle.
Looking back, the IFS economists revealed that although successive generations earn more than their predecessors, they fail to save enough to fund a comfortable retirement.
Uncertain inheritances
For example, at 30 years old, people born in the 60s and 70s have smaller pension funds because they spend more cash, despite earning 75% more than those born in the 40s at the same stage in their lives.
Andrew Hood, one of the authors of the report, said: “Since the Second World War, successive generations have earned more money and enjoyed better living standards than their parents.
“Yet the wealth of those born in the 1960s and 1970s is no more than those who came before them. As a result, younger generations are more likely to rely on inheritances for a comfortable retirement.
“But inheritances are unequally distributed, with households that are already relatively wealthy far more likely to benefit.”
However, 70% of the 60s and 70s generation expect an inheritance, compared to only 40% of their parents.
