Britons born in the 1960s and 1970s will likely have to rely on inherited wealth if they are to be any better off in retirement than their predecessors, according to a new study.
The Institute for Fiscal Studies (IFS), which analysed future incomes in the UK, found there has been a lack of household income growth for the working-age population over the past decade.
The study said as a result the 1960s and 1970s cohorts have not been experiencing the rapid rise in income between the ages of 30 and 50 that their predecessors did.
It also found that younger cohorts do not have higher incomes than those born 10 years earlier had at the same age.
The thinktank said the 1960s and 1970s cohorts did have higher take-home incomes for much of their earlier adulthood than prior cohorts had at the same age.
For example, age-30 real median income was 20% higher for the 1970s cohort than for the 1960s cohort, 52% higher than for the 1950s cohort and 77% higher than for the 1940s cohort.
But the IFS explained because of the large rise in income inequality during the 1980s between the age groups, individuals born in the 1960s and 1970s had significantly more unequal incomes in early adulthood than the 1940s and 1950s cohorts did
The study also noted a significant trend of shifting from occupational defined benefit pension (final salary) plans towards "less generous" defined contribution plans in the private sector
The report claimed this will have affected younger cohorts more than older ones.
In addition, the IFS said if people's expectations are correct, then the number in younger cohorts who will receive an inheritance is far larger than the number in older cohorts who have done (or will do) so.
For example, the study found nearly three in ten (28%) of individuals born in the early 1940s and a large majority (70%) of those born in the late 1970s have received, or expect to receive, an inheritance.
The IFS explained individuals are more likely to expect inheritances – and to expect large inheritances – if they already have relatively high net wealth.
The think-tank said of the 30–34 age group in 2006–08 (born between 1972 and 1978), 78% of the wealthiest third and 45% of the least wealthy third expected a future inheritance, while 35% of the wealthiest third and 12% of the least wealthy third expected a future inheritance worth at least £100,000 ($163,150, €118,521).