The Financial Conduct Authority (FCA) has today unveiled a discussion paper on intergenerational shifts and the challenges posed for financial services.
In particular, the regulator considers the implications for pensions, mortgages, consumer credit and insurance.
You can read the full document here: https://www.fca.org.uk/publication/discussion/dp19-02.pdf
Tom Selby, senior analyst at AJ Bell, comments:
“Millennials face severe challenges in building a decent retirement pot, particularly when compared to Baby Boomers who were more likely to enjoy generous defined benefit (DB) provision. Housing wealth too is highly concentrated within this older generation, who were able to buy relatively cheaply and benefit from rapid price rises through the latter part of the 20th Century.
“On the flip-side younger savers are being boosted by automatic enrolment, with matched contributions and value-for-money pensions now a legal right for most workers. Older workers, on the other hand, were entirely at the whim of their employer and many had no opportunity to build up private pension wealth at all.
“Auto-enrolment only extends to those in employment, however, meaning the growing army of predominantly younger self-employed workers risk missing out. Without a Government-led solution for this section of society they risk facing serious hardship in their later years.
“App-based technology also has the potential to revolutionise savings in the UK, with investments available at the touch of a button. Such advances would have been the stuff of sci-fi fantasy when Baby Boomers were saving for their future retirement.
“There is an argument to say those caught in the middle – so-called Generation X – face the biggest retirement savings challenge. Many will have just missed the boat on DB and will only benefit from auto-enrolment in their 40s, meaning they will face an uphill task in building a decent pension pot.
“Although the challenges that exist for these different cohorts of people are fairly clear, there are no easy solutions. The shift from paternalism to individualism has happened as a result of massive, unstoppable demographic trends – no single product or ‘innovation’ can change this fact.
“Ultimately, those wanting to enjoy a comfortable retirement now need to take responsibility rather than waiting for action from policymakers.”
