Young people today have less chance of becoming truly wealthy than any previous post-war generations, according to a new report.
Whether or not they inherit sizeable assets from parents or other relatives will be the most important factor determining their eventual wealth, rather than ability or effort, analysts from the Resolution Foundation claim.
The report says big falls in home ownership rates since are a key factor in the wealth gap for young adults. Home ownership rates fell from 48 per cent in 2003 to 32 per cent today.
Typical Scottish wealth now totals £237,000 per household, and the total household wealth in Scotland has now exceeded £1 trillion for the first time, the report says.
Overall wealth in Scotland has grown from five times GDP to seven times GDP over the last decade, much faster than incomes which makes it harder to close wealth gaps by earning and saving.
Even a high income family, in the top ten per cent of households with a £58,000 income would have to save every penny they earn for 19 years to become "truly wealthy" – with assets of over £1 million– the report says.
But the reality is 25 per cent of Scots have savings of less than £500, and seven per cent have savings of zero, or have current accounts in the red.
The Foundation is calling for politicians to take more account of wealth in policy-making and debates, and said that while reforms of council tax were welcome, it is one of the most significant wealth taxes. As it is devolved, the Scottish Government could do more to make it more accurately reflect property values, the report says.
Torsten Bell, Director of the Resolution foundation, said: "Wealth in Scotland has grown fast in recent years and will come to play a bigger role in determining life chances in the decades to come.
"This increase in wealth across Scotland has sat alongside falling home ownership rates, particularly for young families, who are struggling to accumulate wealth as preceding generations have been able to."
As a result the 'millennial' generation could be the first since the second world war to earn less than their parents over their lifetime.
"The accumulation, distribution and taxation of wealth should be at the centre of policy debates in Scotland in the years ahead," Mr Bell added. "If current trends continue it will become much harder in modern Scotland to earn your way to being truly wealth, and young people's prospects will depend lesson their ability and more on whether or not they inherit assets from relatives."
Neil Brennan, director of Fitzallan Ltd, Glasgow-based Chartered Financial Planners’, said: "Compared to previous generations, younger people typically stay at home longer, join the job market later and have very high expectations as to standard of living."
Many use disposable income for cars, holidays, leisure activities and fashion their parents might have done without, he said. "Younger generations find it difficult to bridge the ‘wealth gap’ as they have low savings/high spending habits and do not get onto the housing market as early as their parents."
Pension auto-enrolment will help, but young people are starting work later and still do not begin saving for retirement as early as their parents did, he added.
"As a financial adviser, we would encourage young people to save or investor contribute to pensions, even at modest levels, to get the ‘pot boiling’.
"Many younger people will have to rely on inheritances, even modest ones, to allow them to pay off their mortgages or retire before they are very old."
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