We are all living ‘on tick’

Samantha Downes

Samantha Downes

In 20 years' time the state pension is going to be the main source of retirement income for “all income deciles”.

This stark warning comes from the head of John Cridland's state pension age review team.

But we don’t need someone with the credentials of Sofia Stayte, head of the Independent State Pension Age Review, to tell us this.

The death of final salary schemes, the rocketing cost of housing, and low levels of private savings mean even today's high earners would lean on the state for the majority of their income in old age.

What has gone wrong? Well I am no expert, but I have the benefit of being the ear to many different types of financial experts over the last 21 years. And here is my collated take.

The problem is that today’s workers are too busy supporting the lifestyles of the older generation.

The Bank of Mum and Dad – a manifestation of this wealth – may have helped many of their cash-strapped younger generation get on the property ladder.

But it has also – along with buy to let – fuelled property prices. MPs and those high up in our society are loathe to do anything about this bubble because rising house prices are the only psychological crutch stopping people from realising that actually they are ‘poor’. We are all – relatively poor – compared to the older generation.

The money enjoyed by those in their late 60s and older is on the tick in many ways. It was never their money to have - it is all debt. Their final salary schemes were never affordable and their homes should have stayed 

Many economists I speak to are of the opinion we have escaped a full-blown recession because governments around the world have kept interest rates low, allowing more borrowing and more institutionalised debt.

A full-blown recession would have helped clear away the cobwebs and allowed a much needed correction to property prices among other things.

So back to pensions. I was talking to a friend who earns £65k a year. She told me she has had to put her pension plans on hold because she cannot afford to save anything at the moment. This 30 something woman has worked for nearly 20 years and pays over £400 a month in National Insurance contributions.

Those NI payments – as we all know – are being used to pay out the state pensions of today’s retirees. 

There are some pockets of poverty among the older generation, this is true, but why should so many of us. Who work longer hours than ever, who facing rising costs and the prospect of our children or younger family members never owning their own home, also have to subsidise the lifestyles of baby-boomers.

So, channelling my inner Kevin the teenager, I have to say 'it's just not fair'.