Saving the financial future of Maggie's children
Tuesday, 17 October 2006 12:00
There are serious financial problems faced by the generation of children born during Maggie Thatcher's years in power, but there is a way to help.
The Policy Exchange think tank analysed the future of those Britons born between 1980 and 1995 - a period roughly coinciding with Mrs Thatcher's time as prime minister - and predicted what lay in store for them over the next 50 years.
And it is not a pretty picture.
While today's average 50-something has a reasonable company pension scheme and their own property which has benefited from soaring house prices over the last 20 years, Maggie's children get pushed in at the deep end.
With house prices having tripled since 1999, people trying to get onto the property ladder now have to either wait longer, buy with friends, or get into far more debt in comparison with their income than was the case for their parent's generation.
Additionally, with an aging population, companies are closing or have closed final salary pension schemes. This leaves those in their 20s without this protection, working longer, and in a position where their taxes will have to support the state benefits for the ageing generation above them.
Additionally, the ratio of people of working age to the number of retired people is falling - so there are fewer workers to fund an ever-larger pool of retirees, not to mention fund the cost of their care (either through taxes and the NHS or through looking after their own families directly).
The stress on the pension system this causes also means homeowners are increasingly using the equity built up in their homes to fund their own retirements - meaning this wealth is not passed on.
All of this comes on top of the removal of free higher education for everyone, and the advent of mass higher education. Effectively, more Britons than ever are heading to university and they are left in increasingly large debt because of this.
But the 144-page report did offer some solutions to these problems.
The suggested reforms included:
- Improve the availability and affordability of housing through a more decentralised, incentive-based planning system.
- Help in building up savings through Lifetime Savings Accounts, with top-ups from government and greater flexibility in making use of the savings.
- Reform of local government finance, and empowerment of local authorities through much stronger Local Area Agreements, to ensure sustainable funding support for social care and more integrated care for the patient.
"There are some clear trends affecting the life courses of 'Maggie's Children', on which we will need to act now - or at least in the very near future - if we are to ease the pressures that they will face," said Roger Gough, research director of the Policy Exchange.
"There are, however, some reasons for optimism.
"The achievement of cross-party consensus on the state pension offers some hope that pensioners in this age group (who can hope, if the consensus is sustained, to live most or all of their working lives under this regime) will have a secure floor to their incomes that takes many of them out of means-testing."
Mr Gough added: "It is clear that Maggie's Children will face significant pressures, and that policy will have to adjust to ease them.
"Talk of generational wars is of no help in tackling these problems; there is plenty of evidence of solidarity across the generations, and the baby boomers should not be demonised for being lucky.
"Instead, what is needed is a major adjustment of policy instruments in housing, pensions, savings and education, to keep up with economic and demographic change."
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