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The most infamous example of middle-income baby boomers seeking retribution for the loss of their accumulated wealth occurred in Germany in 2009, when a retired builder and his pensioner accomplice took their financial adviser hostage after more than £2m of stock market investments had crashed.
In the UK. the chancellor, Rachel Reeves, is unlikely to face the same prospect if she swipes some of the gains baby boomer’s have amassed from property and pensions in her November budget, but those affected are still going to seek their revenge.
When they should be ready to admit that their run of good luck has exacted a high price on the next generations and the wider economy, wealthy baby boomers are less likely to vote for Labour than any other party at the next election.
“Don’t touch our hard won wealth” is the message the Treasury will hear loud and clear if Reeves adopts some or all of the proposals designed to claw back the monster gains made by this most gilded of generations.
We worked hard and saved assiduously with a view to putting our feet up in retirement, they say. And the gains from property are in part due to their astute eye for a bargain and dedication to upgrading their homes, making them more desirable and expensive to buy.
For the rest of society, this plea rings hollow. If they worked hard, it was never so diligently or productively that it paid for a 30-year retirement.
Of the misconceptions that pensioners and early retirees are prone to believe, the one about pension investments being a fund, amassed over time and drawn on as an income in later life is one of the most widespread.
The phrase pension pot fuels this line of thinking, presenting savers with the image of cash piled high in a huge bank vault, ready to be dispensed every month to its owners. But a pension depends on its investments rising in value and paying an income. This, in turn, depends on today’s private-sector workers being competitive in a global marketplace and successful at continually winning new business and innovating to stay ahead of rivals.
Employers are encouraged by their owners – which could be pension funds or more likely, private equity firms using pension fund money – to pay dividends at the expense of research and development. These employers restrict pay rises and cut hard won terms and conditions to increase profits and raise their share price, hitting younger workers the hardest.
If pension investments are in government bonds, then retirees are complicit in charging governments high interest rates for their borrowing. This is borrowing that is largely needed to fund a health service and pension payments for the benefit of retirees.
Pension savers are also subsidised by the taxpayers to the tune of more than £50bn a year. And many boomers will have gained the most, enjoying a 40% supplement to their monthly savings by at some point being a higher rate taxpayer.
In this way one could consider the personal retirement savings of a pensioner – and the determination of fund managers to increase returns at any cost – to be a blight on the nation and a tax on the younger generation.
In the property game, another myth dominates. Baby boomers believe they have made huge gains by virtue of their own decision-making, whether by extending the property or by choosing to buy their home or homes in desirable parts of the country, whether in cities, fashionable suburbs or coastal towns.
What is desirable is determined by many factors with home improvements being the least significant. The most significant rise in land values – in places where homes already exist – follows significant investment by the state in local amenities, transport, improving schools and cutting crime.
So it is clear that property and pension investing involves a massive transfer from younger people and renters to older homeowners.
This argument has been made many times by organisations like Generation Rent and the Intergenerational Foundation, a research charity, but few want to join the campaign.
As in France, where people riot to protect their unaffordable pensions, the campaigning goes in the opposite direction.
Reeves could sweeten the pill by imposing taxes on the ultra-rich to add to the sense of fairness.
Yet they can prove elusive, meaning only middle-income boomers and their wealth can increase the Treasury’s coffers significantly enough to close the state funding gap.
Boomers will say the chancellor is reneging on longstanding guarantees to savers and homeowners. The German builder, his elderly friend and their wives, who were considered by the court to be complicit in the financial adviser’s kidnap, all thought the same before the financial crash wiped them out financially.
They thought a generous retirement was their right when all around them were losing their jobs or seeing their living standards fall. British boomers should avoid thinking the same way.
