The Financial Conduct Authority (FCA) has published a discussion paper on inter-generational differences, exploring the changing financial needs of consumers from different age groups.

The FCA believes that baby boomers (those born between 1946 and 1965) have often accumulated a decent amount of retirement savings but need to know how best to make use of the Pension Freedoms, or whether they should seek to access the equity in their property. Since the Freedoms were introduced in 2014, annuity sales have declined by 81%, and the majority of consumers now choose to withdraw their pension pots as cash. Funding later life care costs is a significant area of future uncertainty for older age groups. Of course, the number of older people in the UK population is rising significantly and this trend is set to continue.

The regulator says that Generation X (those born between 1966 and 1980) are often struggling to set aside enough money for their pension or to save for emergencies, leaving them open to financial shocks. They may also have high levels of unsecured debt. Amongst all age groups, low interest rates may have led to cheaper borrowing, especially for mortgages and personal loans, encouraging some consumers to take on greater levels of debt. The price caps introduced by the FCA on certain forms of credit could be said to be a response to rising debt levels. Many consumers also don’t have enough insurance against the consequences of events such as death or serious illness.

Meanwhile, millennials (born between 1981 and 2000) can be affected by insecure employment and higher debt, which lead to a reduced ability to save for retirement. The number of self-employed people in the UK increased by 20% between 2010 to 2017; and 900,000 people are estimated to be on zero-hours contracts, representing 2.8% of all people in employment. The age at which millennials can start building property wealth has also increased in recent times – in 1993 first-time buyers might take out a mortgage for around 2.4 times their average salary, but by 2018 this had risen to around 5.2. Many younger people also need to spread their mortgage repayments over longer terms – 39% of new homeowner loans in 2016 had a term of longer than 25 years, compared to 17% in 2007. The proportion of households living in private rented accommodation has increased by around 50% in the last decade.

The regulator will host a summer conference on July 2 2019 to discuss and debate the relevant issues, and to review the responses received by that time. The final deadline for responses to the discussion paper is August 1.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

“From Baby boomers to Generation X to Millennials – everyone’s financial needs and circumstances are evolving. It is clear each generation will have its own challenges.

“With this paper, the FCA has a specific focus on the role the regulatory framework plays in reducing barriers to intergenerational engagement with their finances.

“Now is the time to step back, consider and understand how these needs are evolving and challenge assumptions about consumer needs in the context of different intergenerational factors.”

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