Boomers and Busters

I’ve never set much store by generational definitions. According to the Atlantic, the only one officially recognised by the US Census Bureau is the Baby Boomer. All the rest have been made up and fitted in around the original one. But even the Baby Boomer definition doesn’t really work for the UK because we had two distinct baby booms. The first was taller and sharper but the second lasted much longer.

As this chart from the Resolution Foundation’s Intergenerational Commission report shows, we had two periods after the Second World War where the annual birth rate was between 900,000 and just over 1 million. Because we have imported all the other generational labels from the US, our second baby boom is cut in half. The later part is labelled Generation X simply because we have shoehorned our demographic history into a set of labels designed in America.


Until the discussion of the various generations and their supposed characteristics became fashionable a few years ago, I had no idea that I was a Baby Boomer. (By some definitions, I’m not but let’s not over-complicate things.) The term had usually been used to describe the people born in the late 1940s and early 1950s. For the most part, it still is.

The Baby Boomers were the original Beatles fans and, later on, the hippies. They were the people who made the sixties swing, with their music festivals, fashionsprotest and socially liberal attitudes. The summer of love, the political riots and social unrest of 1968, and festivals like Woodstock and the Isle of Wight are landmark events in what is often described as the Baby Boomers’ defining decade.

It was certainly a defining decade for me and my contemporaries. We were very preoccupied with being born and taking our first steps. While the hippies were trying to change the world, we were at playgroup. While they were spray-painting and singing protest songs, we were finger-painting and singing nursery rhymes. I didn’t know who the Beatles were until after they had split up.

So you will understand why many of us are somewhat bemused to find ourselves categorised as Baby Boomers when most of the usual stories told about that generation don’t apply to us. Many of us deliberately defined ourselves against the hippies. Punk was a reaction against up-itself hippie music. Part of its appeal was that it unnerved the trendy guitar-playing teachers almost as much as it annoyed the old buffers. The sharp and spiky music and fashions of the late 1970s and early 1980s were symbols of very different zeitgeist from the hippie era. The long hair, flowers, jangly music and trodden-on flares didn’t reappear until the end of the 1980s, by which time most of the teenage shoegazing fans were too young to have remembered them the first time around. Perhaps that is a more useful generational divide than the one plonked arbitrarily in the middle of the 1960s.

The second baby boom seemed to take the planners by surprise. Because it continued for ten years it put severe pressure on schools. People complain about class sizes now but the ones at my primary school contained over 40 children. I still have the school reports to prove it. At one point they were teaching classes on tables in the hall, which then had to be cleared away each morning for the school assembly. I can remember the poor teachers trying to control rooms full of unruly children. Some of them just couldn’t do it.

As time has passed, the bulge created by the 60s children has moved upwards through the ONS age profile charts. In the population report published in June, you can clearly see my generation forming that big lump which peaks at around age 50.

Population pyramid for the UK, mid-2015


Source: Office for National Statistics, National Records of Scotland, Northern Ireland Statistics and Research Agency

And this is where the problem starts. What caused trouble for the schools in the 1970s will   do the same for the health and welfare system over the next few decades. Many of those born in the 1960s will be hoping to retire in the next 10 to 20 years. The trouble is, they might not have very much money to do so.

Frances Coppola wrote a piece earlier this week on the rapid fall in interest rates since the 1980s and its likely impact on retirement incomes:

[T]he young adults of the 1980s paid the highest interest rates in history on their mortgages and car loans. Now, they are approaching retirement – indeed the oldest among them have already retired. And today’s ultra-low interest rates seem like a major betrayal. Where have the returns on their savings gone?

This is a bigger problem than it might seem. In the 1980s, companies started to replace defined-benefit pensions, which promised an income based on final salary, with defined-contribution pensions, where the returns on investment provide an income in retirement. By the mid-1990s, most defined-benefit schemes were closed to new entrants.

Replacing defined-benefit with defined-contribution didn’t seem that big a deal at the time. Some people even thought it was better. After all, with the rates prevailing at the time, you wouldn’t need a huge investment portfolio to generate quite a decent income in retirement. It never occurred to anyone that interest rates would fall.

Here too, then, my generation is different from those to whom the Baby Boomer label is usually applied. On the whole, the hippie generation has done rather well out of retirement.  For a number of reasons, they have hung onto the gains they made during their working lives. As the FT explained, there has never been a better time to be in your late 60s.


And as Andy Haldane’s report from his speech in July shows, even the recession years didn’t really do them that much harm.


It is unlikely that later generations will be able to pull off the same trick. As Frances says, membership of defined benefit pension schemes, those that pay out based on final salaries, has declined rapidly over the past fifteen years or so.


Chart via DWP.

This is a problem for all generations, of course, but those of us born in the 1960s assumed  that the post-war world, in which companies provided decent pensions and investments yielded good returns, would last forever. Many of us changed jobs and found the old pension schemes closed replaced by defined contribution ones but didn’t think too much about it at the time. That the new schemes might not pay anywhere near as much barely occurred to us. Because we have less of our working lives left, we have less time to make up the shortfall. With incomes stagnating and interest rates so low, for many people it will be a daunting if not impossible task. Here’s Frances again:

For young people, today’s low interest rates mean that they have to save much more and take more investment risk to achieve the sort of income in retirement that the post-war generation had. But those who were young adults in the 1980s and 90s don’t have enough of their working lives left to build up the size of pension pot now needed to generate a comfortable retirement income. They are looking at a much less prosperous retirement than they expected.

Their wages have been stagnant for a decade, their occupational pensions are stuffed and their state pensions are receding into the distance. They are frightened of cuts to the healthcare they will need in retirement and worried that they may have to sell their houses to pay for their care.

Why should the retirement worries of the 60s children worry anyone else? Because prosperous pensioners, who tend to spend more on leisure than anyone else, may be all that is keeping  the economy in some parts of the country afloat.

We tend to assume that deindustrialisation is yesterday’s news. After all, the factories, mines and steelworks that used to dominate many of our towns are long gone. Their ghosts are still there, though, in the form of their pension schemes. Towns with no industry to speak of still have relatively prosperous pensioners drawing down the benefits from their old employers. In some parts of the country, income from occupational pensions accounts for around 8-10 percent of household income. In areas already heavily dependent on state benefits, the disappearance of this income could be catastrophic.

Bens & Pens

Source: Family Resources Survey, 2014/15 , published 28 June 2016

And disappear it will because the pensions of the next generation of retirees will be nowhere near as generous. In some towns, many of the young people are employed to run around after pensioners, in garden centres, in the hotels where they go for off-season breaks and the pubs where they enjoy weekday lunches. If the next generation can’t afford these things then the jobs will go.

And, as we can see from the charts above, there are a hell of a lot of 60s children. Imagine what will happen as that big bulge of people moves into hopelessly underfunded retirement. Having caused chaos in the school system at the beginning of our lives, we look set to do it to the entire economy at the end. This isn’t just a problem for people of my generation. It’s an economic disaster in waiting.

In all likelihood, most of us will have to work for a lot longer than we thought. Already our state pension age has been pushed out to 67, something which still seems to be news to many of my contemporaries. More than one actuary has suggested to me that by the time we get there it may be closer to 70.

One of the most famous TV dramas depicting the 60s-born generation was the recently received Cold Feet. Perhaps that is a better term for us than trying to squeeze us into definitions imported from the US. I quite like the term Cold Feet Generation. It neatly sums up how many of us feel about retirement.


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26 Responses to Boomers and Busters

  1. Nick says:

    But they have wealth in housing.

    Think now of the generations after them. No housing (most rent), no savings (no disposable income after rent and low rates) and low salaries (automation, migration).

  2. Thanks for this piece. I was born in 1966, so this is about me! And honestly, whilst there was stuff here that I never knew, it broadly fits with my own thinking – although very much better articulated!
    I’ve done ok in life (considering I failed my 11+ and can really only point to my driving test as a beacon of ‘academic’ success!), and i’ve had a little luck in the jobs I’ve done, but my parents (born in the ’30’s) are still way better off than me! Not that I object…better that they are comfortable and active I say.
    It’s my own kids I wonder and worry about, both currently at Uni and costing me a fortune! And not because they’re drinking it all. Rent (clearly many landlords won’t have financial issues in retirement)! They are going to have a very different working lives and harder too I expect. I don’t like that thought, but very little I can do about other than try to support them where I can.
    It is what it is I suppose…

  3. bill40 says:

    Oh the glories of neoliberalism, what’s happened to pensions has been nothing short of daylight robbery. The system we had has been collapsed by the contradiction that defines neoliberalism, they need rich customers and poor workers. Yes it really is that simple and that stupid.

    Given their rallying cry of self sufficiency they seem to do an awful lot to prevent this.

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  5. We’re going to have a glut of old people who need housing, feeding and looking after. We’re also going to have (already have?) a glut of people without jobs or the skills to create them. The obvious solution is to get the latter group to serve the former. Not for free, obviously, but as the oldies have so little money the government would need to subsidise either explicitly and directly or through benefits.

    But without cuts elsewhere (and frankly where is there left to do much cuting?) it’ll have to be done with made-up money or borrowed money. Given the ongoing aversion to increasing governement debt it’ll need to be made-up; effectively something like Corbyn’s peoples-QE. This’ll lead to inflation and then higher interest rates again. Maybe.

  6. Suspect you need to go back a few more years. The collapse of the youth labour market in about 1976 might be the critical issue. Those who got in before then were reasonably OK (though may have been clobbered by later recessions and deindustrialisation), anybody after a much more fractured work history.

    Also worth remembering that the older boomers (and previous) were very low qualified. 1960s group much better qualified (and succeeding ones even better).

  7. Florence says:

    I think your conclusion that the 1950s boomers have “done well” from neo liberalism, based on the evidence you provide is mistaken. The wealth by asset distribution simply shows that if you’re 16 you have fewer assets than your grandparents. How very dare they have worked 50 years and have more material wealth than someone who hasn’t worked at all! While you may have more and better evidence to support your narrative, this chart isn’t it. Your narrative is also sliding pretty close to that being pedalled by the Nudge Unit that all of the boomers have gold plated pensions and three houses, all hoarded of course to the detriment of the young. But your graph also shows that material prosperity declines in old age too, as those with resources are stripped of them to pay for frailty in old age. Also, your headline graphs show a snapshot and national averages. If it were further analysed by gender and class you would see a marked appearance of poverty and even destitution of the Waspi women, and a growing number of men as state pension reform bites and bites hard. So while you sow the seeds in ppls minds about post-pension boomers being wealthy, instead of seeing the perfectly logical increase in net wealth with a lifetime of work, you also have created the insidious notion that there’s “proof” that I’m, sorry they, are a bunch of greedy ;*stards who gained from neoliberalism and so are the bad guys because you damn by correlation, making the inference for the less alert that this is causation . Because I worked all, and had a workplace pension does not mean I either supported neo liberalism or benefited from it. We are not the grasping asset hoarding, ladder pulling up, neo liberals you describe. Many waspi women are in desparate straights, and many (mainly women) are in abject poverty because they and those already retired only qualify for basic pension or social security pension. It was the norm back in the 70s and 80s for workplace pensions to be male only benefits and it took decades to get that changed, decades when women were locked out of many schemes. The govt recognition of the inequality in Pension provisions for that age range of women has been swept away by Osborne, leaving us in the most pitiful state of poverty. You do no one any good by claiming all in that generation are to be pilloried for our age and our “fortune” garnered through neo liberalism. You could provide a decent analysis that shows the total growth in inequality during the neoliberal years, rather than this false narrative.

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  9. Greg Bowman says:

    Just to add a further dimension to your analysis Rick, did you see this weeks article in The Economist about the impact of long term low interest rates? (It’s behind a paywall but here if you have access – . I won’t claim to understand it all but I what I did gain from it was that future pension payments are based on returns with yield rates above what we have currently, and that if these low rates continue much longer there is going to be an ever larger gap between what is funded and what isn’t. Eventually we could end up with a situation whereby pension pots are not just smaller but non-existent because the company in question can’t afford to meet their commitments. I appreciate there are already examples of this but my worry would be that this could become more common in the future, and the Government won’t have the ability to step in and guarantee pensions.

  10. roGER says:

    I was born in the spring of 1965. There was an (American, surprise surprise) attempt to define our generation as Generation Jones:

    It’s true what you say – my class in the final year of primary school consisted of 40 children, whilst when we went to secondary school there were some temporary classrooms, rather like large mobile homes, on the side of the playing fields to accommodate us. My parents (two professional people) have done extremely well over the years – the 1970s inflation basically gave them a free house (a mortgage of £2500 taken out in 1967 was laughable in 1980). Then they retired in the 1990s with final salary pensions.

    I’ve only had a house for the last few years, have less than £50,000 in a pension pot and am looking at retirement at the age of 67 at the earliest, always assuming someone will employ me in my late 60s. I’m considerably better off than many other people my age, but miles behind my parents.

  11. jon heatley says:

    we have all been enjoying the fruits of a world wide Ponzi scheme which assumes the economies will continue to grow so therefore it is safe to borrow ever increasing amounts to invest. This is now beginning to crash and the western central banks and governments are desperate to keep the show going and low interest rates and quantitative easing are essentially flogging a dying donkey. The signs of this collapse happening are our inability to pay for NHS and social care plus the devastating damage being done to pensions. The only solution that I can see is an effective and immediate reduction in the excessive pensions being paid to those lucky ones in receipt of them. We are all going to have to get by on less and the governemts job should be to share out the pain fairly…..

  12. Blissex says:

    «Many of those born in the 1960s will be hoping to retire in the next 10 to 20 years. The trouble is, they might not have very much money to do so. Frances Coppola wrote a piece earlier this week on the rapid fall in interest rates since the 1980s and its likely impact on retirement incomes:»

    I am very surprised to see that both you and F Coppola repeat the usual enormous misunderstanding about type of pension and interest rates, which are minor issues, because what matters is the enormous fall in pension contributions.

    To build a pension over say 40 years that gives something like 50% of “final salary” takes around 30% of “base wage”; that is someone someone on a wage of £30,000 a year, in order to get a £15,000 per year pension, needs to put aside around £10,000 a year, leaving a taxable income of around £20,000.

    Old style “final salary” collective pensions did cost that much: people who thought they were on £20,000 a year “base wage” had around £10,000 extra added on their behalf to the company collective pension fund. The £20,000 plus the £10,000 plus the cost of minor benefits was called the “package value”. But few people understood that concept; many assumed that final salary pensions were magically free.

    What has happened is at the same time as the switch to “money purchase” pensions the total contributions to the individual pension funds have been cut to around 10-12% of “headline wage”, that is the “package value” has shrunk from £30,000 to £22,000, usually in a formula where the employee ostensible contribution is 3-5% and the employer is 5-10%; this has meant that the “base wage” has effectively shrunk to £19,000 and the employer contribution from £10,000 to £2,000, for a total contribution of around £3,000 per year.

    Now that is what matters, because a £3,000 total contribution will, in either “final salary” or “money purchase” schemes, buy a pension that is 1/3 of a £10,000 total contribution, that is something more like £5,000 than £15,000 per year.

    That, or much worse, has happened to nearly all the private or outsourced workers. That is what really matters, what is the big deal. As businesses put it the savage cut in “package value” from £30,000 to £22,000 has been done to «help protect the cost competitiveness of the UK» with respect to countries like China, India, Romania, Poland.

    The switch in pension type from “final salary” to “money purchase” has affected the volatility of pensions, but not their size, given the same contributions; and over a 40 year working career the volatility of individual pension funds would not be far from that of collective pension funds.

    The fall in interest rates has not affected the affordability of pensions, whether based on individual or collective funds, because that largely depends on stock investments which, as interest rates have fallen, have largely boomed.
    The mean impact of falling interest rates on pensions has been purely in accounting terms, because collective pension funds liabilities are actualised with reference to the government bond rate, and that has made them to look much larger than is reasonable, as small fluctuation in interest rate result in large changes in the actualised value.

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  14. JohnM says:

    So, to state the obvious:
    The Gravy Train has departed the station, destination scrap-yard?

    • Blissex says:

      «The Gravy Train has departed the station, destination scrap-yard?»

      Oh noh! Only the second-class and third-class cars have been detached and sent to the scrap yard, because executives and other “people who matter” still get very well funded pension packages. After all while third world countries have plenty of “bulk headcount” in competition with the “bulk headcount” of the first-world, they obviously don’t have anybody who is as productive as “wealth creators” like Fuld or Goodwin🙂.

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  16. Phil Beesley says:

    A data presentation question.

    Birth numbers per year are distinct stats. If the first chart — birth patterns across generations — was presented as a bar chart, I suggest that the size and significance of the second cohort of UK baby boomers would be clearer.

    As a younger member of the UK second cohort of baby boomers, I despair at the label. Having survived compulsory curdled school milk, I’ve lived through the oil crisis, power cuts, hyper inflation, the winter of discontent and Thatcher era mass unemployment. I was thirty years of age before I stopped worrying about having enough money for the bus.

  17. Jim says:

    I think that the biggest difference is the ownership of a home. If rent is about £800 pcm and you own a home with maintenance of approximately £90 pcm you get investment income from your home of £710 pcm tax free.

    The fact that taxes are not due on the imputed value of accommodation is one of the driving forces behind the rich and the poor. Investing in a home to avoid paying tax is a great way to save.

    Whilst some schemes like housing benefit do make up some of the shortfall they are expensive.

    The issue of population dynamics should get more attention. In the current debate around immigration and the EU I have not heard it publicly discussed. Issuing work visas to balance the ration of workers to non workers would certainly be one way to ease the burden of the old on the younger generation.

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