The legacy and responsibility of our golden generation
Many of you reading this will belong to the golden generation – and we are the fortunate ones. Taking my own experience as fairly typical of what that means, I bought my house in the early 1990s and, as such, I’ve done well out of house price increases. I worked for many years for an organisation that offered me a defined benefits pension. Through the ‘80s and the early 2000s, investments also performed very well, so my assets and my affluence grew.
We’re also a generation that is equally fortunate in that many of us will inherit substantial sums from our parents – far beyond what they inherited from their parents in most cases.
It’s generally recognised that – potentially – that combination of value growth and inheritance could make us the first generation that is better off than our children will be. And yet, we’re also leaving the next generation with what is possibly the greatest tax burden since the War. And that is something I feel very strongly about.
Younger generations today will have to meet and repay that borrowing, but they also don’t have the benefit of defined pensions anymore. If they can afford to save the deposit needed to buy a house, the price of that house – and servicing the debt to buy it – will stretch their loan-to-income ratio beyond anything we experienced.
Essentially, with our house price increases, our defined benefit schemes, investment vehicles and so on, we’ve sucked a lot out of finance. Alongside the high levels of public debt we’ve accrued, I think that gives us a responsibility to support the next generation with their financial priorities.
Starting with the obvious, the bank of mum and dad, there needs to be an emphasis on inheritance planning. Not just on how to mitigate the tax on death, but in-life inheritance planning. We’re all likely to live longer , so unless we’re proactive, the next generation quite simply won’t have access to that wealth when they need it most – in their 20s and 30s.
There are already some solutions out there, such as retirement interest only mortgages that allow people to release equity from their homes. But there’s the potential to develop new financial tools to help wealth to be transferred to the next generation, too.
I don’t want us to be the selfish generation that passed on a lot of debt but had a great time along the way. So, from a government perspective, reviewing tax policy also makes sense to me – placing the tax burden on those with the greatest wealth, as unpopular as that may be.
In this, I see huge parallels with the climate crisis. Just as our generation has significantly contributed to the increased energy consumption that’s driving climate change, but the next generation will feel the consequences, the same is true of finance. Quite simply, we’ve sucked the life out of the planet, and we’ve sucked the life out of finance.
An opportunity to change
However, it isn’t too late. We’ve seen how, as professionals and as an industry, we’ve responded to the climate crisis, developing green finance solutions and prioritising ethical and sustainable investments, learning new skills and innovating for a better future. We can do the same to support the next generation.
We should think very carefully about how fortunate we’ve been and how we can release some of that good fortune and wealth to the next generation. It’s a responsibility that goes beyond parenting, beyond the bank of mum and dad, and is upon us all.