The Personal Investment Management & Financial Advice Association (PIMFA) has published the results of its Under 40 Forum Report, which aims to ensure millennials receive the professional advice they require.
PIMFA CEO Liz Field opens the Report by acknowledging the principal issue, saying that “the wealth industry [needs] to get to grips with how [under 40s] think about, plan and interact with money.”
The other concerns discussed in Ms Field’s introduction include:
- The under 40s generation may end up paying more in tax to fund social care
- The Government must examine what motivates under 40s to save money; or for those who don’t save anything, why this is the case
- Financial education could have a part to play here
Some of the key findings of the survey were:
- 44% of respondents said it was too expensive to save for retirement, and only 13% said they were actively saving for retirement. The number of people saving for a holiday, which was 22%, was higher than the retirement figure. The report says “under 40s tend to seek instant gratification, focusing on current needs over saving and planning for the future”
- Only one quarter of respondents were contributing to a workplace pension, when other studies have suggested that 68% of over 40s are contributing. Despite this, 41% of under 40s said they expected to maintain the same lifestyle in retirement
- 85% said they wished that they had received financial education in the past, with 17% describing themselves as having low financial literacy. PIMFA says it is worried that young people’s lack of financial knowledge could lead to them falling victim to a scam, or being prosecuted for tax evasion
The key recommendations made by PIMFA as a result of the study include:
- Better promotion of tools that allow people to see what pension income they will receive in return for a certain level of contribution
- Provision of a low-cost robo-advice model
- Reform of the tax system so that there were incentives for younger people to save money
- Introduce stamp duty relief and allow individuals to use the money they receive from this to be used towards the cost of care
- Employers to provide mandatory financial education at least annually
- Reduce student loan repayments for those making pension contributions that exceed a particular proportion of their salary
- Increase the minimum workplace contribution levels, which currently allow savers to contribute 5% or more of their qualifying earnings and require employers to add at least 3% of earnings. Also, the Association suggests removing or raising the £50,000 upper limit to the qualifying earnings band
The Report cites 2017 research by Forbes, where younger people were asked what they would consider spending their cash on if they were to accumulate any savings. The respondents were able to mention more than one area, but 81% said they would spend their cash on travel, 65% on dining and other socialising and 55% said they would spend on gymnasiums and other fitness facilities. All of these ranked higher than keeping the money invested and saving for the long term.
4,772 under 40s participated in the survey and PIMFA then held a Forum with 47 representatives of the financial services industry.
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