There’s more than a little irony amid the glum findings of a study published this week by the Institute for Fiscal Studies.
The baby-boomers – who lived through the sexual revolution, the birth of rock ‘n’ roll and who are now retiring – will be the last generation to enjoy a golden age of pension provision, according to the research.
Meanwhile their children face being the first generation since the Second World War to be worse off than their parents in retirement.
Live fast, buy young
It will be of little consolation to the children – who were born in the 1960s and 1970s – that the pension mess they face is only partly of their own making.
True, the closure of many defined benefits pension schemes has hit them hard, as have the slow rates of salary growth seen since the financial crisis hit. Low wage inflation has meant that many of those now in their 30s and 40s have seen their salaries stagnate while at the prime of their working lives – and at a time of life when their parents received big pay increases.
Changes to the state pension also mean that that future pensioners will earn less and retire later than the baby-boomers who preceded them.
But the generation who came of age in Thatcherite Britain must also shoulder some responsibility for their plight. Yes, they earned more in their early lives than their forebears – at the age of 30, people born in the 1970s were paid three-quarters more than those born in the 1940s earned at the same stage in life.
But the trouble is they also spent more on maintaining a better living standard. Few had much interest in something as unsexy as saving into a pension – and on average they put away £60 a week less than their parents.
The payback for their hedonistic early lives is now becoming clear – smaller pension pots and lower rates of home ownership.
All of which means that few can look forward to a pension even close to that being enjoyed by their parents.
An inheritance to save the day
Still, you can’t fault their optimism - 70% of those born in the late 70s think they will receive, or have already received, an inheritance. But for most, the assumption that this windfall cash will be the saviour of their pension planning is dangerously misplaced.
As gambles go, it’s a risky one. They are effectively betting “double or quits” that an inheritance will solve their pension worries.
The reality is that care costs will eat up most of their elderly parents’ wealth long before they can leave it to them. Just this week MPs debated a Bill that could force elderly people to pay as much as £150k towards their own care.
Reality check
It’s debatable whether this sort of in-depth and depressing study will actually spur people into saving more into a pension. For some, their natural reaction is to bury their heads in the sand – which can make the pensions crisis worse, not better.
Scare tactics don’t work. Left to their own devices, many people are not taking retirement planning anywhere near seriously enough.
So the government - and the pensions industry - should be doing everything they can to nudge and cajole everyone into starting a pension.
Auto-enrolment, which the government is pinning so much hope on, is nowhere near sufficient to solve the problem we are facing, especially when, as happened this week, the minimum salary level is raised.
The entire pensions system needs to be revisited. What we have at present simply cannot accommodate what we need if we are to avoid an unprecedented pensions crisis.
The whole UK pensions industry needs a radical rethink, and now.
John Fox is managing director of Liberty Sipp
