GUEST COMMENT: A misleading stereotype – the hard-up young vs affluent old

Written by Ken MacIntyre

The stereotype of the hard-up young versus the affluent old is very misleading. In my work helping consumers, I am in frequent contact with people in their late fifties and sixties who have little or no private savings or pensions; often they are unable to work because of poor health and they rely on state benefits for a secure income.

The most recent case was a single man reaching state pension age later this year whose income will not be enough to take him over the income tax threshold. Affluent pensioner households are a minority, given that about half of retired people over state pension age do not pay income tax, implying modest incomes of less than £11,000 a year (2016/17).

The proportion of the population with no private pension savings is fairly stable at about 30 per cent from age 35 upwards (See the ONS Wealth in Great Britain surveys). Wealth inequality is not simply a generational issue.

For example, the ONS Survey shows that 70 per cent of private pension wealth is concentrated in the top 20 per cent of households. Young people’s comparative lack of financial assets is balanced by the fact that their biggest asset is their future earnings and the ability to enhance them with training and qualifications.

Winter fuel payments and TV licences are controversial (the Labour Party is committed to withdrawing these concessions from higher rate taxpayers) but these account for 3 per cent of the total spending on state pensions (Pensions Policy Institute, Pension Facts, November 2015) . Withdrawal from affluent pensioners would be more of a symbolic gesture than any substantial change. And because these benefits are widely regarded as part of the contributory state pension, it might be seen by many pensioners as a breaking the implied contract between the citizen and the state.

State pension spending is committed to decades in advance and a combination of the contributory principle, where you always get what you have paid for, and a rising proportion of older people in the population, means that it is politically difficult to reduce it. It is that rather than any policy decision that has caused a shift in the balance of public spending to older age groups.

Rhetoric about intergenerational warfare is misplaced, given that inequality exists within as well as between generations. And it is not in anyone’s interests to create conflict when all generations must cooperate to create the wealth that ultimately supports all of us.

The guest comment is in response to a feature published in the July 2015 issue of Pensions Age titled Generational Warfare.

Ken MacIntyre has a background in corporate pensions management and since 2014 has been a technical specialist at The Pensions Advisory Service, a DWP-funded service which helps consumers with guidance and information on all aspects of pensions as well as dispute mediation. He writes in a personal capacity. He is a fellow of the Pensions Management Institute and in 2014 was awarded the TPAS Fellowship.

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