Tough financial future for 'IPOD Generation'

The economic position of young people in the UK will significantly worsen unless radical action is taken, a new report has warned.

The report, conducted by think-tank Reform, said that a combination of rising taxes, student debt repayments and pensions contributions would give the average graduate aged 21 - 35 an effective tax burden of nearly 50% early in the next decade.

In a report last year, Reform dubbed the under-35s the 'IPOD Generation' - standing for Insecure, Pressured, Over-taxed and Debt-ridden.

However, Reform said that this year's report showed that the situation was worsening, as young people come under increasing pressure from rising debt, low earnings growth and low savings, as well as facing extreme difficulty in entering the housing market.

The report blamed tax and benefit increases introduced since Labour came to power in 1997, saying that these had significantly penalised young workers.

The report also said that the Pensions White Paper represented "a very bad deal" for young people who will have to pay the costs of more generous state pensions, pay for their own personal pensions on top and retire later.

Meanwhile, older people will gain from a rising state pension linked to earnings.

People over 47 today will still be able to retire at 65.

Reform said that the typical graduate aged between 20 - 35 will lose 48% of their income in tax, student debt repayment and payments into the new national pension saving scheme.

Reform also published the results of an ICM poll which showed that 65% of respondents believed that it was now more difficult for younger people to get started in life than it was for their parents.

Half of those surveyed thought that the tax burden on young people was unfair, compared to 45% of those who disagreed.

Nick Bosanquet, Professor of Health Policy at Imperial College London, said: "Voters of all ages are aware of the difficult and worsening economic position of young people. This issue is key to future economic growth as well as fairness between the generations. We urge the government to give serious attention to it."

Andrew Haldenby, Reform's Director, added: "Young people are in danger of drowning under a sea of rising taxes and new compulsory payments. They are in desperate need of a lifebelt, in the form of a long-term commitment to public spending discipline and tax reductions. If politicians want to re-engage with young people, they will find great value in this agenda."

(KMcA/EF)