Don't rely on property - save for your retirement, Iain Duncan Smith tells young

Iain Duncan Smith today warned young people not to rely on home ownership to fund their retirement.

Unveiling a radical overhaul of the state pension, the Work and Pensions Secretary said rising house prices were putting bricks and mortar out of reach. He added it was "absolutely imperative" that the Government took steps to "secure the position of the next generation" and encourage saving.

In a speech to charity and campaign group Age UK, Mr Duncan Smith set out his aim to simplify pension arrangements, by moving towards a flat rate that would encourage lower earners to save for old age. Introducing a universal pension of about £140 a week would sweep away the current complicated arrangements.

These deliver a basic pension of £96 a week for single people, with a range of top-ups designed to guarantee a minimum income of £132.60. "We have to fundamentally simplify the system. And we have to make it crystal clear to young savers that it pays to save," Mr Duncan Smith said.

He added that 70 per cent of today's pensioners owned their own homes, but their grandchildren were "struggling to even get a foot on the housing ladder" because house prices for first-time buyers had risen by 40 per cent in real terms over the last decade.

"The next generation will not be able to rely on bricks and mortar in the way their parents have been able to," he said. "It's no wonder our children are increasingly cynical about saving."

Figures from the Halifax show the average house price in London was £237,760 last year, compared with £141,326 in 2000. Government sources said workers in their twenties on about £21,000 a year would need to save for 17 years for a deposit in the capital. Mr Duncan Smith said it would be "easy" for ministers to "shirk our responsibilities" to young people, but "that attitude must be consigned to history, otherwise we will bear responsibility for the burdens on our children".

Details of the plans could be set out as early as the Budget on March 23, once talks on how to fund the changes have been concluded with the Treasury.

The proposals were given a broad welcome by experts, though there were warnings that some middle-aged, middle-income earners could lose out. Sources at the Department of Work and Pensions said a "small number" of people may end up worse off, but transition arrangements were being examined.