Younger generations 'less wealthy'

Young people are on course to be less wealthy than older generations, research has found.

Wealth went up in working-age households by more than inflation in the years after the financial crisis but the increase was fuelled by pension values, according to the Institute for Fiscal Studies (IFS).

The respected think tank warned that younger generations would fail to match the wealth accumulated by those a decade older than them based on current rates.

Dave Innes, a research economist at the IFS and an author of the report, said: "Despite the financial crisis, household wealth on average increased in real terms over the late 2000s, driven by increases in private pension entitlements.

"Even with these increases in average wealth, working-age households are at risk of being less wealthy at each age than those born a decade earlier."

Researchers did not analyse why younger generations were set to be less wealthy but lower levels of savings, student debts and the struggle to get on the housing ladder were believed to be likely to play a part.

The study was based on a series of interviews with the same households carried out between 2006 and 2012 as part of the wealth and assets survey.

Average property wealth fell in real terms over the period as house prices fell, while pension wealth went up by £13,000 for households aged 25-34, £32,000 for 35-44 age group and £38,000 for 45-54-year-olds once adjustments were made.

Financial wealth increased by around £4,000, £1,000 and £6,000 for the same age groups on average over the period.

But the report found wide variations in household finances over the period, with a quarter of the 45-54 age group suffering a fall in wealth of more than £69,000 while the same proportion reported an increase of more than £138,000.

Rowena Crawford, a senior research economist at the IFS and one of the authors of the report, said: "It is striking how many individuals do not expect private pensions to have a role in financing their retirement, let alone be their main source of income.

"It will be interesting to see how these attitudes change as auto enrolment into workplace pensions is rolled out."

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