As the IFS finds pensioners are the big winners post-crisis, has policy protected the old at the expense of the young?
Ben Southwood, head of research at the Adam Smith Institute, says Yes.
The government is unfairly protecting the old over the young in two main ways. First, by an excessively generous pensions policy that is steadily diverting more and more to already well-off pensioners. And second, by tight planning policy that drives up rents and house prices. It makes sense to increase pensions with inflation, so living standards for the elderly are maintained. It may even make sense to increase pensions with average wages, so that pensioners enjoy the same improvements as other members of society. But it makes no sense to increase pensions by 2.5 per cent – even when these other indices are flat or falling, as the triple lock does. This partly explains why median incomes have risen around a tenth for the 60 plus but fallen around 7 per cent for 22-30 year olds. This is combined with ever more expensive housing, itself driven by strict planning laws. According to an LSE study, housing would be 35 per cent cheaper in the absence of such tight regulatory constraints. This is a straight redistribution from young tenants to older landlords and homeowners.
Asesh Sarkar, chief executive of SalaryFinance, says No.
With the IFS’s report highlighting a 7 per cent decrease in wages for millennials since the crisis, many will criticise the government – particularly for policies like the pension triple lock. But it’s too easy to blame the powers that be and assume that government action can fix the problem. Undoubtedly, millennials face unprecedented pressures on their finances, evidenced by the difficulty many have in getting on the housing ladder, something previous generations took for granted. But changes in the structure of employment also mean there is no longer such a thing as a job for life, and the increase in student debt means that many start work with less financial security. The answer is to provide assistance where it counts – and employers are key to doing this. Offering employees financial education and benefits which help reduce debts can make a real difference to their financial health. This approach will have an immensely positive effect on millennials’ ability to safeguard their financial futures, and will help to close this generational gap.