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<\/p>\nYounger adults are not nearly as badly off compared to older generations as feared because their private pension wealth has been under-estimated, a new report shows.<\/p>\n
People aged 20-39 increased their share of household wealth from a tenth to just under a fifth during the 2010s, and the gap between old and young is much smaller than official statistics suggest, it says.<\/p>\n
Private pensions make up the largest proportion of household wealth – just ahead of property, which many people think of first when considering what their own assets might be worth.<\/p>\n
But flaws in Office for National Statistics calculations have not reflected the true value of pensions, and subsequent changes that it made were applied going forward but not to previous years, according to the Institute for Fiscal Studies.<\/p>\n
Younger adults hold a much higher share of wealth in Britain than previously thought as a result of what they have saved into their private pensions, it says.<\/p>\n
Meanwhile, the share of wealth held by the top 10 per cent has fallen by more than was suggested by official estimates since 2006\u201308, it adds.<\/p>\n
Gaps in wealth are also wider between people who went to university, and are more likely to save into pensions, and those without a degree, the IFS study shows.<\/p>\n
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Private pensions make up the largest proportion of household wealth – just ahead of property, and followed by financial wealth, then physical wealth like cars and paintings<\/p>\n
Younger people are generally understood to face greater financial challenges due to student debt and higher house prices.\u00a0<\/p>\n
But the IFS report suggests those who can afford to save into pensions hold a bigger than expected share of the country’s household wealth.<\/p>\n
Young adults have benefited from the successful pension auto-enrolment initiative, which started being rolled out in late 2012.\u00a0<\/p>\n
This forced all employers to set up pensions and pay in minimum amounts for their workers.<\/p>\n
Older savers tended to be in generous final salary schemes, which provide a guaranteed income until you die, but these have been closed across the private sector and replaced by stingier defined contribution pensions.<\/p>\n
There is now concern about the retirement prospects of the current midlife generation<\/a>, who lost out because they joined the workforce between the two pension eras that helped their older and younger colleagues.<\/p>\n The IFS report made the following findings.<\/p>\n – Some 54 per cent of total household wealth was held in pensions in 2020\u201322 going by its calculation, compared with only 38 per cent according to ONS figures.<\/p>\n – The share of household wealth held by people aged 20\u201339 increased from 10 per cent in 2010\u201312 to 18 per cent in 2020\u201322 by the IFS measure. But the ONS calculated the share as constant at 8 per cent between 2010\u201312 and 2018\u201320, and then 11 per cent in 2020\u201322.<\/p>\n
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