It is not normal for a speaker to quote 1980s pop supergroup Mike and the Mechanics in a speech on financial issues! However, Christopher Woolard, Executive Director of Strategy and Competition at the Financial Conduct Authority (FCA) opened his July 2018 speech at the Pensions Policy Institute in London with the line:

“Every generation blames the one before. And all of their frustrations, come beating on your door.”

Mr Woolard explained that the lyrics could have relevance to:

  • The frustrations of young people trying to get on the housing ladder
  • The attempts of those in their 50s to put aside enough to enjoy a comfortable retirement
  • The worries of those in their 80s about their health, or about leaving a legacy for their children

The speaker then quoted the oft-repeated line “it wasn’t like that in my day”, and suggested that such a statement was often true, noting that the proportion of 25 to 34 year-olds who own their own home has declined from 67% in 1991 to 36% in 2014, while the proportion using the ‘Bank of Mum and Dad’ for help in buying a home has risen from one fifth to one third in just eight years.

1.42 million people currently aged 35 to 64 will still be paying off their mortgage in retirement.

Mr Woolard then commented on the pensions issues facing a slightly older group of people, commenting that 20% of those aged 45 to 54 have no form of private pension, and that for almost 50% of those reaching retirement the state pension would be their main source of income.

The FCA director then quoted some statistics to demonstrate that many of today’s older generation are asset rich but cash poor. 50% of 70-year olds have assets of approximately £220,000, while 25% have total wealth of around £450,000. However, one quarter of those aged 70 to 89 receive a net income of £8,300 or less, equivalent to the new state pension level.

Mr Woolard added that even if the older generation have significant assets, they still face losing these to pay for long-term care.

He suggested that the generation who are best off could be the three million people aged 65 to 75 who receive income from final salary pensions, who own their home outright and have median wealth of £460,000.

The FCA director suggested that his organisation could alleviate inter-generational issues in three main ways:

  • Ensuring consumers are engaged when making decisions
  • Making sure firms design products that offer good value for money
  • Encouraging consumers to invest and save in appropriate areas

In support of the last of these, he made reference to the recently published pension proposals. The FCA is concerned that a third of consumers who enter drawdown without taking advice have their entire holding in cash, when research shows that they could increase retirement income by up to 37% by investing in a mix of assets instead. The proposals to address these issues include a requirement for providers to send ‘wake up’ packs every five years, and to provide clearer information once an individual customer has started accessing their retirement savings.

In conclusion, Mr Woolard stated that the FCA will publish a paper on intergenerational issues later in 2018.

The information shown in this article was correct at the time of publication. Articles are not routinely reviewed and as such are not updated. Please be aware the facts, circumstances or legal position may change after publication of the article