James Coney 

Generation X has been lost in the middle

James Coney

James Coney

We are all getting poorer, it is official. Or at least that is what the Financial Conduct Authority has said.

Batten down the hatches, spending nothing, prepare for a horrible old age.

The FCA report into the generational divide should be essential reading for any adviser, because it actually manages to lay bare the challenges of financial planning for the next 30 years.

In short, what the FCA discovered was that working age people today had less total wealth than those of the same age a decade earlier.

Not only that, but property wealth starts accumulating four years later. 

These are important issues because what they tell us is that there is a middle band of Generation X – lumbered between the baby boomers and millennials – who have some very real problems.

We will come back to them in a tick.

The arguments over the wealth of the baby boomers have been well rehearsed before, but what is significant about this generation, and what the FCA points out, is that they have not quite got their head round what to do with accumulated assets and how to ensure they bring them a greater standard of living later in life.

Coming just days after the Centre for Policy Studies published its proposals to reform social care by levying a 1 per cent tax on those aged over 50, this is important.

I suspect that what the FCA really means by accumulated wealth is property: it is the most toxic subject of all. 

On average, a house bought 25 years ago for £100,000 is now worth £420,000 – that is double what it would have grown in real terms.

And yet, what to do with this asset remains a conundrum.

You only need look at the equity release figures for the start of the year to see how us Britons have got our head round the idea of using property wealth to splash out.

But to pay for long-term care? No, thank you. 

As an aside, I once described this asset price growth as "unearned". Try it yourself, and see what reaction you get from those who have benefited the most.

Planning for long-term care remains a challenge for the baby boomer, and they are going to have to started accepting that housing wealth is not untouchable.

Choice, when it comes to social care, is everything – but it does cost money.

What, though, are we to make of Generation X, where the conversation is not what to do with accumulated wealth, but how to build it up in the first place?

They are starting families later and they have relatives living longer who may need care. If they are to inherit a property, it may not come until they too are in retirement.

On top of this, most will have missed out on final salary pensions, and entered the workforce too many years ago to have benefited from auto-enrolment.