The Resolution Foundation, headed by Lord Willetts, has suggested a £10,000 windfall for every young person reaching 25 in the UK, funded by a levy for older citizens.
The detailed report can be found here.
This is Iona’s initial reaction:
The impulse behind this proposal is right.We have a perverse scenario in 21st century Britain where people in retirement typically have higher incomes than young people in work.This setback in generational progress is fostering a dangerous cocktail of political resentment and economic dysfunction.But it is no good giving £10,000 to young people if they don’t know what to do with it. Unless it was accompanied by remedial financial education, this windfall will simply exacerbate the stark divide in financial confidence and resources among young people today.Those with savvy investor families will end up doing a lot more with their £10,000 than someone on the breadline, who would be far better off with extended debt forbearance and some intensive guidance as to how to make their money go further.My generation is the last to leave school without formal financial education, and the first to really suffer for it.You can make a lot of terrible decisions when it comes to buying property, starting businesses or paying into pensions. As we’ve seen with pension freedoms, people can end up paying a high price for access to large sums of cash, whether it’s unforeseen tax or fraud perpetrated by predatory companies.Perhaps some of this money could be better used if it were ploughed into programmes that help school leavers prevent debt build-up and make more informed financial decisions. Putting the money into a supervised savings account, with mentors to oversee how the cash would be spent, might also be a more intelligent approach.However, I commend Resolution and Lord Willetts for confronting this problem head-on with some inventive suggestions. It is infinitely preferable to the staid, reactionary and tribal discourse on pensions and tax today.The call to reform our National Insurance system is also sound and overdue. It is more than reasonable to ask that older workers contribute as much (if not more) into a system that young workers cannot fund on their own.And the suggestion to make employers contribute into pensions for the self-employed gets my vote. How else can we raise pension saving among Britain’s gig workers without putting an unfair funding burden on their shoulders?