1980s children half as wealthy by their early 30s as 70s counterparts, says IFS

People born in the 1980s are only half as well off as those born in the 1970s were at the same age, a new survey reveals.

By their early 30s, people born in the decade dominated by Margaret Thatcher have an average net household wealth of £27,000 per adult, including housing, financial, and private pension assets.

This compared with the £53,000 enjoyed by those born in the 1970s at the same stage in life, according to the Institute for Fiscal Studies (IFS).

The survey found that the children of the early 1980s find it much harder to build up wealth in housing and pensions as they age, and are the first post-war cohort not to have higher incomes than those born in the previous decade.

That is because of an overall stagnation in working-age incomes, and due to the financial crash hitting young adults the hardest, the IFS finds.

Soaring house prices mean those born in the 1980s have the lowest home ownership rates for any generation in half a century.

Just 40% are owner-occupiers at the age of 30, compared with at least 55% of those born in previous post-war decades at the same stage in life.

Children of the 1980s renting by their late 20s spend 30% of their net income on housing costs.

Those with their own homes spend 15%, compared with the 20% level for such outgoings paid by people born in the 1960s at the same age.

Pensions also represent a major loss for people born in the 1980s due to the disappearance of many generous defined benefit (DB) schemes.

Less than 10% of private sector employees born in the early 1980s are members of a DB scheme, compared with more than 15% of those born in the 1970s, and 40% of those born in the 1960s.

Andrew Hood, of the IFS, said: "By the time they hit their early 30s, those born in the early 1980s had about half as much wealth as those born in the 1970s did at the same age.

"Sharp falls in home-ownership rates and in access to generous company pension schemes, alongside historically low interest rates, will make it much harder for today's young adults to build up wealth in future than it was for previous generations."

Liberal Democrat Treasury spokeswoman Susan Kramer said: "This is what happens when short-term political calculations override the need to build a better future for everyone.

"Year after year, government after government, we are failing to support the next generation, often because the simplest political solution is to focus purely on those more likely to vote. We need to redress the balance between generations.

"That doesn't mean pitting the old against the young, but it does mean ensuring that we put as much store in building more homes, investing in education and creating a fair tax system as we do on vital social programmes for older people.

"That is why any new Government fiscal rules should include a requirement on Government to assess the balance of spending and taxation between generations, meaning that Government must work to help us all build a better life for our children and grandchildren."

Wage stagnation saw the real median income for those aged 25 to 55 rise by 2% in the decade to 2015, compared with a surge of 26% in the decade to 2005, the IFS report stated.

But those born in the early 1980s still started adulthood with higher incomes than those born in the 1960s, but they have accumulated significantly less wealth due to the property price boom and pension changes.

The level of home ownership achieved by the children of the 1980s is the lowest by any cohort at the same age since the one for people born in the 1930s.

Due to policies like auto-enrolment, 70% of people born in the 1980s are members of a workplace pension scheme, compared with 55% of those born in the 1970s.

But the shift from DB pensions to defined contribution (DC) pensions means the children of the 1980s gain less from such schemes.

The survey found that 90% of people in DB schemes in 2015 received an employer contribution equivalent to 10% of their earnings or more, compared with only 13% of those in DC schemes.

A Government spokesman said: "Since 2010 we've made real progress in improving people's living standards - 2.7 million more people in our country have a job; we've given a pay rise to a million of the lowest paid with the national living wage; we've increased the personal allowance so that 1.3 million people will be taken out of income tax altogether by next year; and we've overhauled the welfare system so it pays to work. ?

"And through our landmark Help to Buy schemes, we have helped 185,000 people achieve their ambition of home ownership.

"As the Prime Minister has said, the Government is determined to build an economy that works for all, not just the privileged few."