Pensions crisis looming for young people as many are gambling on property to pay for their retirement

The study found that many of those aged between 25 and 34 have been forced to stretch themselves to the limit to buy a home and have pinned their hopes on rising property prices to provide for their retirement.

But those hopes are likely to be in vain if the example of today's retired is anything to go by.

The research found that while property owners aged 55 and over have seen the value of their homes rocket, their cash income has not risen in a decade.

With sky-high mortgages to pay off and minimal savings, young people face the same predicament of having all their wealth tied up in their homes and little cash for day-to-day living.

The study, carried out by the International Longevity Centre, showed that the proportion of 25-to- 34-year-olds saving into a pension halved from 26 per cent in 1995 to 13 per cent in 2005.

The average value of property owned by the same age group rose from £65,000 to £167,000 - but their average mortgage debt went up from £50,000 to £94,000.

On top of the mortgage, their average household debt shot up from £2,400 to £4,600 in the same period.

James Lloyd, senior researcher for the think-tank, warned: "Despite the property wealth of older households more than doubling in value during the decade after 1995, these rising property assets are not actually resulting in an improved standard of living for older people in retirement.

"Now a new generation are seeing their retirement saving skewed towards property assets, with bigger mortgages and falling contributions to private personal pensions.

"But the young risk being let down badly if they think that buying a property is the best way to save for retirement.

"They may find themselves in the same position as today's older cohorts, with large volumes of illiquid wealth that are failing to contribute to any extra income in retirement."

The research, commissioned by financial services groups Prudential and Partnership Assurance, found that the proportion of those aged between 55 and 64 saving for a pension remained steady at 20 per cent, while it had fallen among all other age groups between 1995 and 2005.

Just two per cent of 16-to-24-year-olds now pay into a personal pension.

Young adults may boast greater total wealth than ever before, but in many cases this is because their parents have helped them put down large deposits on a first home.

And, having stretched themselves to buy a property, many then find they have little or nothing left over to plough into savings schemes, ISAs, or other investments.

Mr Lloyd said that to ward off misery, young people needed to think about spreading their investments.

"The average 30-year-old now has more total wealth," he said.

"But at the same time they have got this much bigger mortgage to pay.

"Property should be part of an investment portfolio, but not the only part."

Ian Owen, chairman of Partnership Assurance, said: "The move towards property as a vehicle for retirement underscores the need for high quality financial advice and education, so that people are aware of the options open to them and the benefits and limitations of various saving methods."

The research is the latest round of bad news for young homebuyers.

Last week, homeowners were warned that they face even higher mortgage bills because of the global credit crunch, with the Halifax and Abbey among those to have already pushed up some rates.

Banks and building societies are also tightening their lending rules, making it harder for first-time buyers to get a loan.