Pensions and intergenerational justice: who cares?

Angus Hanton explores why so few of the younger generation are prepared to invest sensibly in their old ageAsking people in their 20s what they think of their economic position is revealing. Some are angry at the cards they have been dealt and are not happy that the government has built up so many liabilities. Many, however, seem to accept the position as just being “how it is” and there seem to be a number of reasons for this acceptance.

Young people socialise with people of their own age

Younger people are mostly “all in the same boat together”, and so they look at their position relative to their peers. On this basis, they are not surprised by the difficulties of getting work, finding housing and the level of debt (both student and government debt) they are being asked to take on.

This ties up with observations that most people socialise with those of their own age and may also explain in turn why those in their 50s are so unaware of the pressures on young people.

The future always belongs to the young

Younger people may instinctively realise that they hold the future power, so they will review the intergenerational financial arrangements in due course.

There has also been a general de-politicisation of younger people in the last 20–30 years, which may partly explain why a section of the younger generation seems apathetic towards these issues. Young people are liable to feel disillusioned by a political system which is skewed towards the interests of the older generation, as shown by the relatively low participation rates by younger people in recent elections.

This means that where there are intergenerational issues with people voting on generational lines, then “grey voters” have a distinct advantage through higher participation rates but also because their relative numbers are increasing. It seems unlikely that younger people will tolerate that for long and there may also be increasing numbers of baby boomers who will sympathise with, and act with, younger people.

All pensions seem a long way off to young people

It’s also worth noting that those in their 20s usually show little interest even their own pensions, much less the overall pension system.

Both pensions and national debt are subjects which are notoriously hard to get people excited about. For example, a recent survey relating to current austerities asked people whether they thought the UK’s National Debt over the 2010-2015 period would increase, reduce or stay the same. Only 9% got it right: that it would increase – and will do so by at least £350 billion over that period.

The biggest reason young people might have for not getting involved with pensions is that they offer them such poor deal. While the traditional advice remains that young people should start saving for a pension as early as possible, this ignores the fact that most private pension funds offer exceptionally low returns.

The recent report from the Workplace Retirement Income Commission (WRIC) into private pension funds found that many people who move between different jobs end with a range of small, personal pension pots which are then invested inefficiently by fund managers and eroded by high charges, producing only a very modest retirement income when the time comes – hardly an appealing option for young workers.

Young activists concentrate on environmental justice

Young people are smarter than they are given credit for, as well as being naturally optimistic.

They have, until now, largely concentrated their efforts on campaigning over environmental issues – intergenerational injustices which might be impossible to reverse.

In the financial area, the older generation may be acting in ways that are distinctly un-smart – for example leaving the younger generation in such a poor financial position that they simply have to break the government’s unfunded pension promises and take other measures later on to redress the intergenerational balance.