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Fairness between the generations
Some commentators wish to stir a battle between the generations.
The young have their advocates, telling us the baby boomers now reaching retirement have done too well at the expense of others. They point to high house prices making it difficult for first time buyers, and high rents sometimes paid to buy to let landlords who may themselves be baby boomers.
Pensioner savers have their supporters, saying that they have been hard done by with ultra low interest rates and poor annuity rates on retirement thanks to quantitative easing and the low rates in the aftermath of the banking crash.
The truth is more mixed. Both generations have their advantages and their challenges in the current situation, and both have policy interventions designed to help them.
The younger generation has the benefit of much lower interest rates when they can find a house and a mortgage than their parents faced. They also now have the benefit of very low inflation, compared to the rates we were used to in the 1970s and early 1980s. The government has added its Help to Buy scheme, and is pressing ahead with ways of securing more new homes.
The older generation of savers have made money from the rise in asset values brought on by quantitative easing and the general economic policy. Those savers who bought property or shares or certain kinds of savings bond are likely to have decent capital gains today on what they bought in past years. The government has now added the National Savings Bonds with higher interest rates for those who do not want to risk their capital but need a better return than the 0.5% base rate.
There is another truth which the generation warriors ignore. Within most families one generation helps another. Much of the wealth of the baby boomers will be passed on to their children and grandchildren on death. Some of it is being passed on before death, as parents help children with home deposits or other large ticket items in their budgets. Just as some grandparents help with the household chores and childcare of their children, so some help with gifts of cash. The money which is not passed on will be taken in tax by the state. That money can then be spent on those most in need.
Conservatives have announced they will keep Pensioner bus passes, free tv licences for the over 75s,and winter heating allowances. Do you agree?
Source: http://johnredwoodsdiary.com/2015/02/24/fairness-between-the-generations/
