Advice Investments Wealth management

From Millennials to Baby Boomers: what does the generation game mean for our finances?


Ian Browne

Pensions expert

22 August 2019

Historically financial services companies came into existence for three key reasons: To help to preserve our assets; to assist customers to grow their wealth; and provide the infrastructure of a monetised economy by facilitating transactions and safe custody. 

Finance companies have been competing to deliver safe-keeping, wealth preservation, and investment growth for hundreds of years but the way they do so has to continually evolve. As the world around us changes, so too must our financial system, not least in order to ensure it serves its purpose fairly to all.

Recently, the Financial Conduct Authority kicked-off a study into intergenerational finance, aiming to understand whether the industry is doing enough to keep up with demographic change.

The pace of change in recent decades has rapidly transformed our lives, and with it our financial needs. Life expectancy has sky-rocketed thanks to improvements in healthcare, creating added demands on our pensions and savings; the rise of the service sector has led to mass-uptake of education, eventually resulting in student loans as the government struggled to cover the cost of offering free university places; and the changing nature of employment means more multi-jobbers and the end of the ‘job for life’.

The FCA says: ‘Baby Boomers will need to develop new financial strategies to maintain living standards in later life. Younger people face a series of difficulties in building wealth due to the combined impact of rising house prices, unsecure employment and student debt. So-called 'Generation X' are likely to be financially stretched, torn between the responsibility of helping older generations in later life and providing financial support to the younger generations.’

At Quilter one of our aims is to help create prosperity for the generations of today and tomorrow. That means helping people to be financially secure in later life, but also supporting people building for the future. And we want to do more than just help our own customers; we also want to promote prosperity across every generation in all the markets we operate in.

That’s why we’re engaging with the regulator’s study of intergenerational finance. We want to share our views on the way changing demographics are transforming our financial needs and how the finance industry should keep pace.

The issues are broad and varied, with no easy answers. But here are some of the things we have concerns about:

  • The rise of flexible working and self-employment could leave gaps in retirement savings provision. Self-employment has risen 17% since auto-enrolment was introduced in 2012. But the self-employed are outside of the auto-enrolment savings policy and if the trend continues, the savings gap will grow.
  • Challenges in the property market mean that increasing numbers of people are likely to carry mortgage debt into later life. Around 40% of mortgages approved in 2017 had terms running until the borrower was beyond age 65. For those generations struggling with high property prices today, the cost of borrowing over a longer term could harm their retirement plans in the future.
  • Today’s retirees are the first generation ever to enjoy complete freedom and choice when it comes to using their pension savings. Since 2015 retirees are no longer compelled to buy a guaranteed income product, known as an annuity, and instead have the flexibility to remain invested and take income from their pension as they need it. They have embraced the opportunity, with nearly £30bn of flexible pension payments made in just four years. But at the same time, responsibility for retirement funding has shifted away from institutions and onto individuals through the decline of guaranteed income pensions such as annuities and defined benefit schemes, as well as pressure on government to suppress state pension benefits in an ageing society. We need to make sure retirees have the right information and advice available to manage this shift toward personal responsibility.

The FCA’s study will be used to gather evidence from the public, charities, think tanks, financial services companies and other stakeholders and inform the regulator’s views going forward.

The findings may identify areas of the financial system which could be reformed to ensure it keeps up with changing life patterns.

Where the study does identify opportunities for reform they will need to be full thought through, future-proofed changes. We’re in this for the long-haul and want to do our bit to ensure this latest study of intergenerational finance delivers for both today and tomorrow.