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Baby boomers vs millennials: FCA dives into generation battle

Spotlight on pension, insurance, mortgage and credit inequality


The UK Financial Conduct Authority (FCA) has unveiled a discussion paper to examine how the industry should react and adapt to the ever-changing needs and challenges faced by different generations, and how they interact with their finances.

A great focus is being given to pensions, insurance, mortgages and credit as they are likely to be the areas with the most significant differences between age groups.

According to Christopher Woolard, executive director for strategy and competition at the FCA, there are three things that will underpin any future strategy.

“First, we want to test publicly our understanding of the issues that different generations face, to ensure our assumptions and approach stay relevant for tomorrow’s consumers.

“Second, we want to bring stakeholders together to pinpoint the issues which need a response.

“Finally, we want to identify any specific action that we can take to help the market to meet these changing consumer needs.”

Mind the generation gap

“There is a growing awareness of the varying wealth profiles and financial challenges faced by different generations; be they baby boomers, generation X or millennials,” said Steven Cameron, pensions director at Aegon.

“Both socio-economic and demographic trends have led to significant change over the last 10 or 20 years, meaning individuals across the age bands can have very different attitudes towards, and needs from, financial services.”

Similarly, Tom Selby, senior analyst at AJ Bell, pointed out the increasing difficulties that younger generations will face in retirement.

“Millennials face severe challenges in building a decent retirement pot, particularly when compared to baby boomers who were more likely to enjoy generous defined benefit (DB) provisions.

“Housing wealth too is highly concentrated within this older generation, who were able to buy relatively cheaply and benefit from rapid price rises through the latter part of the 20th century.”

Will tech be the answer?

But technology has the potential to meet the needs of the younger cohorts, who may not identify with the more traditional ways of the financial services industry.

Selby added: “App-based technology also has the potential to revolutionise savings in the UK, with investments available at the touch of a button. Such advances would have been the stuff of sci-fi fantasy when baby boomers were saving for their future retirement.”

But the main player has to be the government, Cameron argued.

“It’s essential that government policies fully reflect these age differences and that all policy areas not only meet the needs of each generation, but deliver inter-generational fairness.

“This is particularly important in areas such as pensions, social care and housing, where the financial services industry has a key role to play in supporting individuals with their financial planning.

“As our population ages, attitudes towards retirement are becoming more flexible, while the financial challenges of funding social care will continue to grow, making this a priority.”

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