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The postwar generation has enjoyed a seemingly unbroken run of good luck, from free university education to the house price boom. Even in retirement their good fortune continues, with many enjoying generous final salary pensions. How can they make the most of these advantages in retirement and how can they use their wealth to help their less fortunate children?
The post-war baby-boomer generation which has helped transform society over the past 50 years is now facing its biggest challenge: retirement.
The first baby boomers are already drawing their pensions, and millions more will join them over the next decade.
Given the demographic and economic power they wield, this generation was never going to slip quietly away to the golf course or the garden. Instead, they look likely to change how we view retirement in future.
Those in their fifties and sixties today may be nervous about the current economic storms, which will have battered their retirement plans. Investment returns have been poor for a decade, annuity rates are tumbling and many will have seen company pensions scaled back in recent years.
Some may now be wondering whether what was once billed as "the holiday of a lifetime" will turn out to be a financial nightmare. But against this, baby boomers should remember that they have benefited from financial advantages that their parents and their children could only dream of.
The facts speak for themselves. More than 80pc of the nation's £6.7trn in wealth is owned by baby boomers (those born between 1946 and 1964). Collectively, the country owns £2.6trn in shares and savings and those aged 50 to 64 own £1trn of this. A third of the £1.8trn held in pension funds is owned by this age group (and a further quarter is owned by those aged between 45 and 50). And they own 40pc of the £2.5trn tied up in property. In fact, property has been such a staggeringly good investment for this generation that one in five baby boomers owns a second home.
As Will Hutton of the Work Foundation and a baby boomer himself pointed out: "Having enjoyed a life of free love, free school meals, free universities, defined benefit pensions, mainly full employment and a 40-year-long housing boom, [the baby boomers] are bequeathing their children sky-high house prices, debts and shrivelled pensions. A 60 year-old today is a very privileged and lucky human being."
The key to the financial success of the baby boomers has been rising house prices. Robert Gardner, the chief economist at Nationwide, said: "The baby boomer generation benefited from significant house price rises in some cases over 100pc in real terms. Housing was also more affordable during the mid Seventies and the Eighties, with a much lower house-price-to-earnings ratio than today."
This helped create a huge increase in home ownership. And this demand, fuelled by baby boomers buying their first homes, then moving into bigger homes as their families grew, helped drive prices higher.
As Philippa Gee, a financial adviser, said: "This is the golden ticket that has helped secure the financial future of many baby boomers." But as she pointed out, this "golden ticket" can't be used to bail them out of every eventuality, from propping up pensions, paying for future care or helping their children get a leg up on the housing ladder.
The priority for most people will be financing their own retirement. The good news is that baby boomers can expect to live longer, and healthier, lives than their own parents, although this will require a larger pension pot to fund it.
While many baby boomers have enjoyed generous final salary pensions, this is by no means universally true and much will depend on where they worked.
According to the National Association of Pension Funds, a third of those aged 45 to 54, and almost one in five of those aged between 55 and 64, have some kind of earnings-linked pension scheme. Those who have gaps in their pension provision need to look at how they will fund their retirement. This may mean taking into account other assets, such as property and investments.
Steve Lowe of Just Retirement (Xetra: A0LFE0 - news) said: "This is a generation known for their activism and engagement, and for spearheading a consumer revolution. These now need to be applied to their own retirement options. Baby boomers can't afford to simply sleepwalk into retirement."
The nature of retirement is changing. More people now opt for a more phased approach, moving from full-time to part-time work, and working beyond their state pension age. Recent legislation has helped facilitate this. And baby boomers now have a wider range of pension products (from drawdown to fixed-term annuities) with lower costs and more transparent charges.
Baby boomers also need to consider their future care options. Infirmity may still be decades away, but it pays to plan. Ms Gee said: "I always used to be asked by clients how they could avoid paying future care costs. But since the recent publicity surrounding care homes, people now tell me they want to pay themselves, so they have control over the care they receive."
While many will want to use their assets to help children, or even grandchildren, this needs to be balanced against your own retirement needs. Ms Gee said: "Don't insist your children follow the same route you have. Baby boomers may have profited hugely from rising house prices, but this won't necessarily happen in future."
She (SNP: ^SHEY - news) said people should consider downsizing rather than equity release plans. "A lot of families are caught up in the notion that they don't want to sell the home, and that it should be preserved for the next generation." But this is often impractical. For a start there is the cost of running a home that is bigger than you need which eats into your resources and often it has to be sold anyway if a person needs care.
In some cases it may be better to sell sooner, she said, when you have control over the timing, can maximise your property's value and use the proceeds as you wish.
Inheritance tax planning is also crucial. While "skiing" spending the kids' inheritance has become a widely used acronym, many more baby boomers are aware they are the "lucky ones" and want to maximise what goes to their children and grandchildren, who are facing a far bleaker financial future
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0 users disliked this commentA Yahoo! User 9 minutes ago Report Abuse People go on saying how lucky past generations are and how well they've done - ok some did have it good, but certainly not all. People have worked hard to provide for their families, keep a roof over their heads, food on the table and bills paid on time. This is a generation for people who yes may be they had free school meals and free milk etc, but that was because it was very much needed to support working families. Its only ever the rich who get richer and thats a fact. Todays generations need help from the government to bring back the values that this generation were brought up on eg mainly married couples who received tax allowances such as we did when we got married in 86, but that was soon removed and morals and values soon slid downwards. So give a positive thought to those who have worked hard all their lives, struggled, save alittle and brought up children they deserve to retire and then maybe the next generation and get paid employment and begin to start living and enjoying the rewards it brings. C
SOY NO TIME TO EDIT IT ALL BUT DO YOU AGEE WITH THESE COMMENTS IN THIS ATICLE?
Many of the points in hte article are true, but it is written by someone in the pension industry - a financial "service" whose main aim is to make large profits for the people controlling the industry rather than provide money for people's pensions. The most glaring inaccuracy is the statement that people have "benefited" from increased house prices. The only true benefit is to people who can sell the houses and downsize, or to their heirs .I don't personally think giving large sums of money to descendents is necessarily a good thing, especially when it causes bad blood amongst descendents when they don't get what they think they are "entitled" to .
Anyway that is my punt Denise
I do believe that those Baby Boomers, todays pensioners waste their political power. I'm afraid far too many like myself don't even bother to vote. The trouble is whilst I don't vote on a matter of principal they don't vote because they couldn't care less. Perhaps if the baby boomers had used a little more of their political clout I would be in a position today where I could find someone worth voting for.
Make Love, Not War
The trouble is Phil, a lot of the baby boomers decided it was all due to the blessed Margaret ( a bit like the blessed Lenin 50 or so years before) and thought everything is OK & we can party. Now a proportion have grown up to be the crooks that contol the financial system and they care .??.. for anyone else
You are so correct this attitude of I'm alright Jack prevails in our society today. I'm afraid too many think I am comfortable and safe why should I bother how others are. This even filters up to the people who we elect to fight for us, be it in the Council or the Government. I think it is a toss up for the last caring politician in the commons between the late Micky Foot and Tony Ben.
Make Love, Not War