Difficult years ahead for all warns latest intergenerational audit 

The Resolution Foundation’s latest intergenerational audit and the forecasts in the recent Autumn Statement present grim reading for the vast majority of our country’s population for the years ahead.

As a nation, we are currently living through the start of what is likely to be a long-lasting and far-reaching cost-of-living crisis. The crisis is likely to negatively and substantially affect the financial security and quality of life of the vast majority of the population but its impact will be felt differently by different generations.

I want to look at how older people are likely to be impacted and the actions that can be taken to limit the severity of the consequences.

This year’s audit reveals that older age groups will experience the largest shock to their disposable incomes from rising energy prices. People aged 75 and over will experience the sharpest rise in the proportion of disposable income spent on energy and are ultimately expected to dedicate a greater share of their income to energy costs than any other age group.

This is because older people tend to live in larger and less energy efficient homes. In 2019-20 only a third of households headed by a person aged 65 or older lived in an energy efficient home (defined as homes with an EPC rating of C or above), compared to around half of households headed by someone aged 44 or less, the report finds. Those energy costs are compounded by the fact that residents aged 65 and above are almost three times more likely to be the head occupant of an above average sized home compared to 16-29 year olds.

A national retrofitting programme is urgently needed to make our nation’s homes more efficient. This should be accompanied by a network of ‘Good Home Agencies’ across the country that build on the positives of existing improvement agencies and provide advice, access to finance and practical support.

The audit also reveals that older workers overwhelmingly make up the bulk of the more than 300,000 working-age adults who have left the labour market since the start of the COVID-19 pandemic with 50–64 year olds representing more than 9 in 10 of this group. There has been a sharp rise in economically inactive 50–64 year olds reporting long-term sickness or disability. However, the audit finds this rise is largely attributed to people who were already inactive before the pandemic. With the main reason given for the rise in economic inactivity among 50–64 year olds being early retirement, there are concerns these older workers are gone for good from the labour market. Only 5-10% of retired people ever return to paid work, the audit details.

At Ageing Better, we would like to see employers do more to attract, engage and retain older workers, who form a growing part of the workforce as our population ages. Offering flexible working wherever possible and minimising age-bias in recruitment are both vital steps to develop age-inclusive workplaces. Next week, we will be launching a new initiative for employers looking to tap into the skills and experiences of older workers.

The audit estimates that those experiencing middle-age are expected to spend the most on energy this winter. The typical energy bill for 50–64 year olds is expected to rise by around £1,030 from pre-crisis levels. And while 40–49 and 50–64 year olds will gain the most from short-term cost-of-living support measures from the government, by 2026 these groups’ household incomes will be most harmed by the tax and benefit changes announced since 2020, finds the Resolution Foundation.

This pre-pandemic trend of increased inactivity among 50–64 year olds because of long-term sickness or disability continues has accelerated since the pandemic, with long COVID and long NHS waiting lists possible explanations. Furthermore, high interest rates have pushed down the value of private pension wealth for everybody with Resolution Foundation highlighting that those on the cusp of retirement are hit the hardest as they cannot wait for the market to recover before drawing down their pension.

All of this means that any plans to further increase the state pension age (SPA) should be approached with considerable caution. The prosperity of 50–64 year olds is falling and employment opportunities in our ageist workplace shrink as people approach retirement. Our own research with the IFS earlier this year showed that the increase in SPA from 65 to 66 doubled absolute income poverty among this group. Rushing through further increases could plunge many more older workers into poverty.

The youngest employees have seen the largest falls in real wages as a result of rising inflation. However, inflation has also eroded the spending power of existing wealth. This is particularly worrying for older age groups reliant on fixed pension pots and whose wealth could be significantly reduced by a sizeable fall in house prices. The audit finds that those aged 65 and above are expected to see the real value of their wealth fall by £24,000 between January 2020 and January 2024.

People aged 80 or above devote a higher share of their expenditure on food and energy, which have rocketed in price this year. And this means they could face inflation rates of around 15% – five percentage points higher than expected rates for 18–20 year olds.

The intergenerational audit makes the convincing case for targeted support to help the most vulnerable in both younger and older generations to help meet their housing and employment needs in a time where there will be fewer resources to deliver that support and where everyone will be told they need to make sacrifices. It will be vital in these challenging times that lie ahead not to pit generations against each other in a battle of who is more deserving of help.