All 25-year-olds should be given a £10,000 ‘citizen’s inheritance’ to help close the generational wealth gap, says a report.
The Resolution Foundation released the report today following its intergenerational commission, a two-year long study on wealth distribution and living standards.
The research found that the disposable income of 30-year-olds today was no higher than the generation before them, despite the economy having grown 14% in the last 15 years.
It also pointed out that, of the millennials set to inherit their parents’ estate, the average age for them to receive this was 61.
“The generational contract - the idea that we all look after each other at different stages of our lives - is important to everybody, and what today’s report is saying is that we need big changes to make sure the old can get the social care they need and expect, and that the young who’ve borne the brunt of the financial crisis need big changes to help them,” said Torsten Bell, director of the Resolution Foundation.
“The citizen’s inheritance is just one part of the package.”
Speaking on Julia Hartley-Brewer's breakfast show this morning, he said that millennials were the first generation in some years to be doing worse than the one before them.
“Right across the 20th century, generation after generation had higher earnings than the generation that came before them,” he said.
“In Britain unlike in lots of the world we saw a combination of that significant progress for generations then a complete ending of that progress for today’s millennials.
“It’s that boom and bust of progress that makes it feel particularly severe in the UK.”
To fund the £10,000, which would be given to people when they turn 25, the foundation proposes a change in current inheritance tax policies.
Currently, inheritance is taxed at 40% above £325,000, although the threshold is rising and will allow couples to pass on homes worth £1 million tax-free by 2020.
Instead of this, all gifts or inheritances should be taxed at 20% up to £500,000, and 30% above that.
“In practice we think the money should be allowed to be used for four purposes: for a deposit for a home either to buy or to rent; for pension savings; for qualifications including paying down tuition fee debt; and fourthly for setting up a business,” says Bell.
He says the favourable living standards enjoyed by baby boomers shouldn’t be seen as a one-off.
“As our economy grows and new technologies become available, we should be able to deliver rising living standards for each generation,” he said.
“Our polling of the public showed that they all think that should be the case.
“That should be something we all aspire to, not something we give up on.”