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Intergenerational differences and the future of financial services

11/08/2020

The Financial Conduct Authority (FCA) has published its Feedback Statement on last year's Discussion Paper (DP/2) on Intergenerational Differences. Intergenerational fairness is an increasingly pressing concern, with a wide disparity in financial circumstances across the generations caused by changing socio-economic conditions and exacerbated by a growing ageing population. Younger generations are struggling to find secure, well-paid jobs and affordable housing, while many of the older generation risk not having sufficient savings in later life and face the prospect of a lack of support in meeting long-term care needs. Intergenerational differences and their impact The key drivers of intergenerational differences are the ageing population; low interest rates; rising house prices; the changing nature of employment; and changes to student funding. Millennials face higher levels of uncertainty and insecurity compared to previous generations at a similar point in their life cycle. They have high levels of student debt and are experiencing a lack of real growth in earning potential. While there are many positives to auto-enrolment pensions, this competes with savings needs, meaning the prospect of home ownership is diminished or delayed. Meanwhile Generation X is facing simultaneous financial demands in supporting their children and their ageing parents and, for many, inadequate pensions as they fall between the gap of DB pensions and auto-enrolment. This age group has the highest level of unsecured debt (excluding student loans) of any generation. Baby Boomers, on the other hand, have largely benefitted from increasing house prices, accumulating equity in their homes, and many will have DB pension wealth. What the FCA ...

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