Economy

Raiding our Pension Pots won’t Solve the Generation Gap

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Nobody can be in doubt of the significant challenges faced by the current government. One can be virulently opposed to every iota of its political existence, but still accept the maw of provision that must be filled. Young people are especially at risk of being left out of this discourse. Recent actions taken by the government, universities and law enforcement reflect a shimmering beam of light on a class of people side-lined and then blamed. Providing a path for young people’s future is the job of good governance – a moral, not political path. 

At a webinar organised by Prospect magazine, the Minister for Pensions and Financial Inclusion Guy Opperman MP spoke of opportunities for pension reform that bulldozed that moral path. His idea was of a product whereby young people could access their workplace pension pots to help pay for a mortgage deposit. This sum of money, which no doubt has been a success for pensions policymaking, would thereby be an open letterbox leaving less money for later life. The Financial Times reported on the comments immediately.

At what cost, Minister? At what cost would this open access be to young people? To be totally fair to Guy Opperman, his sincerity is clear and he only suggested he was ‘curious’ of such a change to policy. But we should absolutely consider a better way of helping young people get onto the housing ladder before manning the air raid sirens, donning a tin hat and heading to the shelter.

The title of Prospect’s webinar called the 2020s the ‘crunch decade’. This title is pertinent for several policy areas, not just finances and youth affairs. A mechanism which would allow young people to raid their pensions for property deposits is a clear, glowing vote-winner. But, considering the current market, mortgage lending and property value are not wise investments. The FT’s consumer editor Claer Barrett thought as much, writing of the risks that this affordable housing scheme would bring. Her brief mention of rent policy is a much more important bruise that needs healing, not misguided pension changes.

But let’s be clear. This curious ‘mechanism’ is a sticking plaster for a social divide that needs more than simple first aid. While transferring pension pots to present problems may seem like humdrum economic policy, it fails to address wealth inequalities between generations, thus fuelling this conflict further.

Generational inequality has gained pace. It will become a much greater instability unless political action is taken to address it. Take pensions for example – the workplace pensions policy and ‘Automatic Enrolment’ are lauded as a remarkable success in recent years. But, as highlighted by Resolution Foundation, the Covid pandemic has exposed a jobs market that leaves young people much more susceptible to redundancy and unemployment than other workers. If young people can’t get a job, what use is a workplace pension?

Youth unemployment is on track to hit one in five young people. Being on the dole at this age is debilitating – I should know. Job insecurity is not a one-time problem, and in the context of the pandemic, the economic effects will leave a scar for future activity, not just in economic terms. Lord Willetts spoke of a real risk to losing this generation to Covid’s damage. Any policy which merely delays acting on generational inequality is actively widening the gap.

This depression will see young people hit hardest in an already fragile environment. It’s not just housing where this darkness resides, though it is a key proportion. In matters of health, culture, environment and rights, young people are pushed to the bottom of the heap. You only have to look at the prevailing narrative on Covid to see this. Younger people are less likely to have serious complications from the virus, and thus are both fodder for economic revival and the cause of its spread. Students are being handed £10,000 fines for house parties and kicked out of university while their complaints about their online learning, sexual assault and bullying are promptly ignored.

It’s hard not to feel pilloried and ignored by this ‘mother knows best’ system. Even in discourse over young people’s treatment are younger writers and journalists being dismissed for columnists with decades of experience. Guy Opperman may see his pension pot raiding as a route for first-time buyers’ success. But, as ever with this policy area, it’s ineffectual to wider social problems.

Pensions are our safety nets. Taking value from them for a not-so-sure investment, in uncertain times and on a shaky foundation, is the act of a policymaker who doesn’t respect the people it hits. The pensions minister may be earnest in his dedication – but for young people, the bricks aren’t enough.

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