Mind the wealth gap

BRITAIN’S YOUNGER generation are likely to get left behind due to debt and high house prices, creating an inequality of wealth, according to a new report, commissioned by Channel 5. The report revealed fewer than half of millennials (those born between 1981 and 2000) are expected to own a home by the age of 45, while debt among this group is also rising. This also poses issues for the children of these millennials, who will have no property passed down to them and a greater need to focus on saving for retirement.

A separate study by the Financial Conduct Authority (FCA) found 25-to34-year-olds have aboveaverage debts. One fifth of this age group have no savings and a further third have less than £1,000.

According to the Institute for Public Policy Research, “every generation since the post-war baby boomers has accumulated less wealth than the generation before at the same age. The next generation is set to have less wealth, largely due to housing inequalities.” Home ownership has been falling across all age groups since the mid-2000s and is at its lowest in nearly 30 years. For 25-to-34-year-olds, it has fallen from 59 per cent in 2003 to 37 per cent in 2015.

London house prices are now over ten times the average salary of first-time buyers. This makes it “increasingly hard” for the younger generation to share in the UK’s wealth, according to the report, unless they have “substantial” support from family.

A survey by YouGov/Royal London, shows a growing intergenerational divide, where wealth is held by older generations (aged 75 to 85) who are keen to pass some of this directly to their grandchildren, typically split between four or five recipients. However, less than a quarter of those aged 25 to 44 will inherit from grandparents, leaving many younger family members excluded altogether from inheritance, especially as their parents are in many cases already part of Generation Rent, with private renters accounting for more than 20 per cent of the housing market.

It is this sandwich generation (aged 45 to 64) who feel under more pressure to pass on any accumulated wealth, as they can see for themselves the pressures their children are and will be facing.

While the Government will be called upon to take action over this generational wealth gap, experts also agree it is down to individuals to review their savings and focus on building a financially secure future. Talking to an independent financial adviser such as NLP Financial Management will allow people to explore options they may not have previously considered, to enable them to build a financial nest egg, to either help with the purchase of property or go towards their retirement in later years.

Many young people will inherit nothing’

Lee Pittal is director and chief operations officer at NLP, nlpfm.co.uk