Britain's youth are steadily being treated worse and worse

Intergenerational index spikes at 128 for 2010

Britain's intergenerational unfairness was 28 per cent worse in 2010 than it was in 2000, and over 50 per cent worse than it was 1990, according to new research from the Intergenerational Foundation. The increase from 2009 to 2010 alone was almost 6 per cent.

The IF created the intergenerational index to measure, in a systematic way, the extent of intergenerational unfairness. Normalised so that the year 2000 has an intergenerational index of 100, we can see the steady increase throughout the early noughties turn into a sharp spike following the crash:

Looking at the breakdown of the index reveals the reasons for the recent spike. The IF look at nine different areas: Unemployment, housing, pensions, government debt, participation in democracy, health, income, environmental impact and education. Of the nine, only environmental impact has been consistently getting better, with the UK's greenhouse gas emmissions dropping 15 of the last 20 years. Every other measure has been getting worse.

There are some questionable choices in the index, however. Worst of all is the measurement of government debt. It is not clear whether increasing government debt is intergenerationally unfair at all. Right now, for instance, the absolute best thing for young people in Britain would be for government debt to increase as the coalition u-turns on austerity. The generalised excuse, that debt is borrowing against future generations to spend now, doesn't mean that all debt is bad for future generations; yet the index treats it as such.

Similarly, the chosen measures for "participation in democracy" are average age of councillors and turnout of 25 to 34 year-olds. It seems odd to take what is definitely a choice on the part of young people not to get involved in politics and pretend that it is on the same level as, say, the precipitous drop in housebuilding to the lowest levels since the second world war:

Much of the recent spike, however, comes from components of the index which are inarguably on-topic. The large increase in government debt between 2009 and 2010 raised its part of the index by almost thirty points, but three other areas also rose by over ten points each. As seen above, the housing situation has got worse rather sharply, leading its part of the index to rise from 120 to 130.

The index also highlights pensions as a growing problem. The cost of state pensions in relation to the size of the workforce, and the cost of unfunded public sector pensions, pushes the pension section of the index up by another 13 points.

But one of the worst changes is that of education. A spike in the average private contribution to tuition fees – and this is for 2010, so that increase is nothing to do with this government – meant that education went from a steady contributor to intergenerational fairness, with costs going down and standards increasing, to a component as bad as it has been since 1999.

The full affect of the various components is broken down:

Laurence J. Kotlikoff, a professor of Economics at Boston University, ends his foreword:

As the Intergenerational Foundation's vitally important Intergenerational Index makes vividly clear, the UK is failing miserably. . . The Index can be viewed as an Adults' Report Card, and it shows a failing grade.

For all the methodological problems, the conclusion seems clear: when the recession hit, the response of the Labour government was to pile the costs on to young people and future generations, while saving those who were deemed to have already contributed from too much hardship. Many of the component measures can only have gone down in the last few years, but how far remains to be seen.

Pensions may be one of the largest contributors to intergenerational inequality. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Stability is essential to solve the pension problem

The new chancellor must ensure we have a period of stability for pension policymaking in order for everyone to acclimatise to a new era of personal responsibility in retirement, says 

There was a time when retirement seemed to take care of itself. It was normal to work, retire and then receive the state pension plus a company final salary pension, often a fairly generous figure, which also paid out to a spouse or partner on death.

That normality simply doesn’t exist for most people in 2016. There is much less certainty on what retirement looks like. The genesis of these experiences also starts much earlier. As final salary schemes fall out of favour, the UK is reaching a tipping point where savings in ‘defined contribution’ pension schemes become the most prevalent form of traditional retirement saving.

Saving for a ‘pension’ can mean a multitude of different things and the way your savings are organised can make a big difference to whether or not you are able to do what you planned in your later life – and also how your money is treated once you die.

George Osborne established a place for himself in the canon of personal savings policy through the introduction of ‘freedom and choice’ in pensions in 2015. This changed the rules dramatically, and gave pension income a level of public interest it had never seen before. Effectively the policymakers changed the rules, left the ring and took the ropes with them as we entered a new era of personal responsibility in retirement.

But what difference has that made? Have people changed their plans as a result, and what does 'normal' for retirement income look like now?

Old Mutual Wealth has just released. with YouGov, its third detailed survey of how people in the UK are planning their income needs in retirement. What is becoming clear is that 'normal' looks nothing like it did before. People have adjusted and are operating according to a new normal.

In the new normal, people are reliant on multiple sources of income in retirement, including actively using their home, as more people anticipate downsizing to provide some income. 24 per cent of future retirees have said they would consider releasing value from their home in one way or another.

In the new normal, working beyond your state pension age is no longer seen as drudgery. With increasing longevity, the appeal of keeping busy with work has grown. Almost one-third of future retirees are expecting work to provide some of their income in retirement, with just under half suggesting one of the reasons for doing so would be to maintain social interaction.

The new normal means less binary decision-making. Each choice an individual makes along the way becomes critical, and the answers themselves are less obvious. How do you best invest your savings? Where is the best place for a rainy day fund? How do you want to take income in the future and what happens to your assets when you die?

 An abundance of choices to provide answers to the above questions is good, but too much choice can paralyse decision-making. The new normal requires a plan earlier in life.

All the while, policymakers have continued to give people plenty of things to think about. In the past 12 months alone, the previous chancellor deliberated over whether – and how – to cut pension tax relief for higher earners. The ‘pensions-ISA’ system was mooted as the culmination of a project to hand savers complete control over their retirement savings, while also providing a welcome boost to Treasury coffers in the short term.

During her time as pensions minister, Baroness Altmann voiced her support for the current system of taxing pension income, rather than contributions, indicating a split between the DWP and HM Treasury on the matter. Baroness Altmann’s replacement at the DWP is Richard Harrington. It remains to be seen how much influence he will have and on what side of the camp he sits regarding taxing pensions.

Meanwhile, Philip Hammond has entered the Treasury while our new Prime Minister calls for greater unity. Following a tumultuous time for pensions, a change in tone towards greater unity and cross-department collaboration would be very welcome.

In order for everyone to acclimatise properly to the new normal, the new chancellor should commit to a return to a longer-term, strategic approach to pensions policymaking, enabling all parties, from regulators and providers to customers, to make decisions with confidence that the landscape will not continue to shift as fundamentally as it has in recent times.

Steven Levin is CEO of investment platforms at Old Mutual Wealth.

To view all of Old Mutual Wealth’s retirement reports, visit: products-and-investments/ pensions/pensions2015/