There's been something of a lack of clarity about this downturn. On the one hand, economic indicators hint we should soon be seeing the famous 'green shoots' of recovery: rallies in TMT shares and in manufacturing; low unemployment and record low interest rates. On the other, any improvement in individuals' spending power looks set to be swept away by two nightmare scenarios.
Firstly, house prices, particularly for first-time buyers, are out of all reach. Prices, say experts, have been forced up by property investors and a rush of buy-to-let deals. The implication of such rises on the cost of living is huge.
Secondly, and more worryingly, the pensions shortfall. The annual fund managers’ conference in Brighton last week was alive with horror stories and the conference consensus was that the pensions shortfall was in the order of £27bn.
With disappointing take-up of stakeholder pensions and savings generally, pensions experts are flagging up warnings to a generation whose tax receipts are paying for today’s pensioners. This new generation of college-leavers and graduates are faced with 1) paying off education loans; 2) paying an all but unaffordable mortgage; and 3) ramping up their savings for retirement.
The penalties for not achieving this 40-year stint of constant vigilance and careful savings don’t really bear thinking about. And unlike the chancellor’s kind of fiscal prudence, this one doesn’t seem to have much of a pay off – or any apparent new income streams to cash in on.
We are all going to have to save harder and for longer. But with what?