Young Money Report

Young Money 2015
Executive Summary
MRM’s third annual Young Money Report, “Generation A: From Austerity to Aspiration,” looks at the attitudes of 1000
18-25 year olds who have lived large parts of their adult life under the shadow of austerity. The study features contributions from several leading experts across financial services and aims to lift the lid on young people’s thoughts on a
range of topics including pensions and benefits, advice and access, saving and spending and investing.
Our report shows that the fall out of the financial crisis almost a decade ago has left Generation A with a far more
sensible attitude when it comes to money. They recognise how important it is to their future to make wise financial
decisions. However, they often find that a lack of disposable income thwarts their ability to achieve their financial aims.
While Generation A remains aspirational, the ever spiralling costs of housing, education, flat wages and uncertainty in
the job market does mean the odds are stacked against them and our study has unearthed a deep sense of frustration
among today’s young people.
While many have a good working knowledge of the various financial products on the market and have a strong desire
to use them, a startling number are simply unable to do so, as their disposable income does not allow them to. Whether it be pensions, savings, investing or access to advice, our study shows that young people are willing to engage with
financial services products even if their pockets often preclude them from doing so.
In the Young Money Report we decided to dig a little deeper, examining the saving and spending habits of this group,
analysing how advice and access is approached, and scrutinising investment goals. We also looked at how this age
group tends to view the concept of protection, through insurance products, pensions and workplace benefits.
At a time when the job market is more fluid than ever and continues to evolve, the future looks an exciting one.
However, in an era that has been largely characterised by austerity, the Young Money Report seeks to find out if the financial dreams of 18-25 year olds can still be realised. With that in mind our panel of experts share their own analysis
of the findings below and offer a set of recommendations for the industry to help young people work toward a better
financial future.
- Sophie Robson, Consultant at MRM and Author of Young Money Report 2015
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Young Money 2015
Contents
Executive Summary
2
Pensions & Benefits
Key Facts
Expert View - Darren Philp, The People’s Pension
Expert View - Steve Bee, Jargonfree Benefits
Expert View - Jonathan Bland, Pensions Geeks 4
5
7
8
9
Saving & Spending
Key Facts
Expert View - Adrian Lowcock, AXA Wealth
Expert View - Neil Lovatt, Scottish Friendly
Expert View - Andrew Baddeley-Chappell, Nationwide Building Society
10
11
13
14
15
Investing & the Economy
Key Facts
Expert View - Darius McDermott, Chelsea Financial Services
Expert View - Adrian Cammidge, Kames Capital
Expert View - Chris Williams, Wealth Horizon 16
17
19
20
21
Advice & Access
Key Facts
Expert View - Lisa Winnard, Sesame Bankhall Group
Expert View - Jason Butler, Author of The Financial Times Guide to Wealth Management 22
23
25
26
Recommendations
27
3
Young Money 2015
Pensions & Benefits
G
eneration A is busy trying to ensure that they can make ends meet today and so for many, retirement seems a
long way off.
When we consider that a third (32%) view buying a home as their number one financial priority, a concern is that
today’s 18-25 year olds are placing too much emphasis on getting onto the property ladder and failing to make more
tangible financial plans for their later years. Under the circumstances, this could be a risky strategy.
4
Young Money 2015
Key Facts
A fifth admit they know nothing about pensions and as such, don’t save for a pension
34% expect to retire between
the ages of 66 and 70
Low disposable income remains a barrier to pensions
saving, as does the desire to
buy property
Of those paying into a pension,
more men contribute than women
5
54% believe they should be
fully covered if they are
unable to work because of
illness
65% of Generation A
are not paying into a
pension pot
Young Money 2015
Great expectations
Demystifying pensions
Despite understanding the concept
of retirement and the associated
financial strain, there is a distinct lack
of urgency in the minds of younger
people when it comes to pensions;
in fact, research1 has shown that
people don’t start thinking about their
retirement prospects until the age of
48, by which time it’s arguably too
late to put away a meaningful sum to
support life post-work.
There has long been talk of demystifying pensions and the language
associated with them – one of our
previous Young Money Reports
revealed that young people were
more likely to recognise a French,
Spanish or German word than they
were to understand what an annuity
is – and our research shows that
there is still a way to go.
But does Generation A have an
accurate picture of when they are
likely to feel the full impact of this?
Generally speaking, yes. Just over
a third (34%) expect to retire somewhere between the ages of 66-70.
Regionally, those in Northern Ireland
were most optimistic about when
they might be able to retire – with
37% expecting to be able to stop
working between the ages of 60 and
65. On the other hand, those in the
South West were quite pessimistic only 17% thought they’d be able to
retire at the same age.
So what’s stopping Generation A putting something away each month?
Of the 65% who are not saving
into a pension, 43% aren’t because they are simply unable
to, due to a lack of disposable
income.
A fifth (20%) haven’t started saving
yet as they believe there is plenty
of time to pay into one. Despite the
pressures on their income, those in
London were most likely to be saving
into a pension already – 42%. Least
well-prepared were those in the
North East – just one in five (20%)
were saving into one.
In fact, a fifth (20%) of Generation
A makes zero pension contributions simply because they are
confused about how pensions
work.
The pension freedoms announced
in the 2015 Budget make saving
into a pension considerably easier
for younger people, who are now
able to control their money in the
way that suits their circumstances
best. The challenge now is to ensure
that Generation A understands what
the changes mean for it, and acts
accordingly.
Taking responsibility
Of those members of Generation
A who are saving into a pension,
over three-quarters (76%) are doing
so through a company pension,
demonstrating the value of workplace
pension schemes, particularly among
this age group.
Almost three in ten (28%) pay into
a private pension scheme via direct
debit.
Although much of Generation A is
trying to cut the apron strings when it
comes to finances, 7% say that their
pension contributions are currently
coming from a family member.
Benefits: no one-size-fits-all
When it comes to the workplace,
health benefits are reportedly most
appreciated2 by Generation A and,
although they may not know it, over
half of 18-25 year olds believe that
income protection is a necessary
benefit to which they’re entitled: 54%
say that they should be able to get
full pay if they are off work for a long
time due to illness. Just under half
(48%) feel that they should be able to
claim benefits if they find themselves
unemployed.
Conclusions
Just over a third (34%) of Generation A expect to retire somewhere
between the age of 66-70, with the
average age predicted for retirement
being 70.
65% are not saving into a pension:
43% say they are simply unable to,
due to a lack of disposable income,
20% say they are confused about
how pensions work, and 20% do not
see it as something they need to
think about at this stage in their life.
Of those who are saving into a pension, just over three-quarters (76%)
are doing so through a company
pension.
Men are more likely than women to invest in a private scheme
regularly, with 34% of male 18-25
year olds paying into a private
pension, compared to just 25% of
women.
2
http://www.bofaml.com/content/dam/boamlimages/documents/articles/B2_078/b2_078_workplace_benefits_report.pdf
1
http://www.thelancet.com/pdfs/journals/
lancet/PIIS0140-6736(15)60296-3.pdf
6
Young Money 2015
Expert View
Name:
Darren Philp
Position:
Director of Policy and Market
Engagement
Company:
The People’s Pension
Bio:
Darren’s responsibilities include
policy, public affairs, press and
marketing communications.
Previously he held directorships
at the NAPF: Director of Policy and Director of the Pension
Quality Mark. Before joining The
People’s Pension, Darren was
also at HM Treasury, where he
worked for almost 13 years in
a variety of policy and economics-related roles. Darren headed
up the Treasury’s Pensions and
Pensioners team between 20072010.
“We shouldn’t really be shocked
that 18-25 year olds are not thinking
about their retirement yet. After all,
they are perhaps less than a third of
their way towards retirement – if such
a concept still exists when they get
there.
“Financial priorities change over time.
If young people are saving it’s more
likely to be for shorter term objectives
such as a holiday, for study, a car
or a deposit on a first home. Unlike
earlier generations, their disposable
income will not increase for quite
some time. Certainly not once they’re
on the housing ladder, and the kids
have come along. Trust me, I know!
“We’ve recently done some research
which shows that people in general,
not just Generation A, really don’t
understand pensions. Despite this,
it’s actually quite encouraging to note
that only one in five felt completely
disengaged as a result.
“This might be because a greater
percentage of younger than older people have been brought into
pension saving for the first time by
auto-enrolment.
“The next challenge will come when
minimum contributions rise. Seeing
1% of your salary disappear each
month might be bearable – the trick
will be to keep people saving when
these go up. That’s where messaging
comes in, and it is down to all of us
to support the saving message. We
need to get the message across that
saving more, earlier, means saving
less for the same outcome – let
7
investment growth do more of the
work for you.
“If there’s one image that typifies
Generation A, it’s of someone who is
constantly on their smartphone. Tapping into this obsession seems like
an ideal way of engaging people with
their savings. That’s one of the
reasons why we’ve supported a pension dashboard for so long. Seeing
your savings in one place is a key
way of making people more aware of
what they have and what they need
to do.
“For the youngest workers, retirement is a long way off, and probably
getting further away. But if we can
encourage them to save, then the
day when they can slow down a bit
might be an awful lot closer.”
Young Money 2015
Expert View
Name:
Steve Bee
Position:
Founder
Company:
Jargonfree Benefits
Bio:
Steve Bee, former Head of Pensions at Prudential and Pension
Strategist at the Royal London
Group, set up Jargonfree Benefits in 2009 to help provide
simple straightfoward pensions
that everyone can understand.
He is also a multi award-winning
blogger and works as a cartoonist under alter-ego PensionsGuru. Steve is possibly the only
person ever to have submitted
evidence to a Commons
Select Committee in cartoon-strip format.
“It comes as no surprise to me to
hear that today’s 18 to 25 yearolds are not thinking about retirement. Why would they?
pendence; and not the point where
those controlling the workplace and
the economy decide to put them out
to pasture.
“This new generation and the generation just ahead of them are likely to
be the ones that redefine retirement
anyway and I for one would like them
to concentrate on that rather than
fitting into the norm as perceived by
the generations spawned in the very
different worlds of the 1940s and
1960s.
“I would be interested to hear what
Generation A thinks about the idea of
achieving financial independence as
a lifetime goal. Very interested.
“Retirement, I am sure, will come
to be seen as a point in life where,
if they are lucky (or prudent), an
individual will reach financial inde-
“As to them currently knowing little or
nothing about pensions; good. They
should keep it that way.
“Pensions are nothing other than
long-term savings; savings that may
one day contribute to an individual’s
financial independence. Workplace
pensions are better still in that em8
ployers contribute towards them as
well.
“The generation that benefitted the
most from so-called ‘gold-plated’
company pensions paid into by their
employers didn’t understand them
either; that was not a problem for
them. Auto-enrolled workplace
pensions for Generation A will allow
many in that generation to accumulate passive earnings they may eventually be able to use to change their
later lives for the better, just as some
of the lucky Boomers are doing right
now. Let’s hope this time the workplace pension reforms get more than
half the working population accumulating future assets, that’s all.”
Young Money 2015
Expert View
Name:
Jonathan Bland
Position:
Founder
Company:
Pension Geeks
Bio:
Jonathan is the Founder and
Director of UK based,
award-winning pension communications company Pension
Geeks, which specialises in
creating vibrant and engaging
animations, videos, calculators,
games and apps for the
pensions and employee benefits market and for wider businesses. They are also behind
the hugely successful ‘Pension
Awareness Day’ campaign in
the UK, which takes place on
15th September annually.
“It’s a worrying thought that young
people are still not thinking about
retirement but these findings do not
come as a surprise.
“The introduction of auto-enrolment
has been great as a means of getting
people enrolled into a workplace
pension, but we still have work to do
in ensuring we do not become complacent and that young people are
engaged with their saving plans.
“We also need to ensure we are
helping the many people that do not
qualify for auto-enrolment so that
they don’t slip through the net.
“Everyone is living longer and if we
do not encourage or incentivise
people to save, the threat of living in
poverty in later life is very real.
“The root cause of the problem, I
believe, is that we are failing to
connect with young people and offer
them the level of education they can
engage with, so that they enter into
the savings habit early.
“Quite often, when we don’t understand things we don’t engage with
them, and this is part of the problem
with pensions.
“Pensions are seen as boring and
complex, they’re something associated with older people and retirement
is too far off for young people to
imagine when they are in the prime of
9
their lives. They want to focus on the
here and now and spend their money
as they please.
“To inspire and empower young
people to save for the future then,
we need to look at changing the
whole image of pensions and how
they are communicated.”
Young Money 2015
Saving & Spending
S
ince 2008, deep spending cuts have been the crux of the UK Government’s strategy to help reduce the deficit in
the UK, but there have been inevitable casualties, particularly among Generation A. The impact has been significant; a million people used food banks1 between April 2014 and April 2015, with young people making up a large
proportion of that figure.
In our latest study, Generation A has revealed the extent to which austerity has impacted not only their incomes, but
also on their ability to effectively plan for the future. Despite possessing a solid understanding of the savings options
available to them, many simply find themselves unable to put anything aside.
1
http://www.trusselltrust.org/stats
10
Young Money 2015
Key Facts
Nearly a quarter (21%)
say their outgoings are
too high to save
Despite this Generation A is determined to save...
have at least
some savings
is the average size
of a savings pot
11
Property ownership is
still the largest driver
for saving
Young Money 2015
Climbing onto the first rung
Getting a foot on the property ladder
is notoriously difficult for any firsttime buyer, but the high deposits
demanded by lenders make securing
a mortgage unattainable for many
18-25 year olds.
Despite this, saving for a deposit
remains the priority for a great number of young people, with just under
a third (32%) saying that this is their
top savings goal.
More than four in ten (42%) simply do not earn enough to save,
with more than a fifth (21%) saying that their outgoings are just
too high to allow them to put any
money aside.
it comes to pension contributions1,
yet young women still struggle more
than their male counterparts to make
savings – almost half (45%) say that
they do not earn enough to save,
compared to just over a third (36%)
of young men. However, the average
female saver has £3,391 stowed
away, while their male counterparts
have, on average, £3,274 saved.
Women appear to be more concerned with short-term savings goals,
compared with men. For instance,
more than one in five (22%) were
most keen to pay off their debts and
a just over one in five’s primary financial goal was to save for a holiday.
However, just 5% thought it was most
important to save towards retirement,
versus more than 10% of men. This
suggests that a ‘goals-based’ saving
programme might be more appropriate for women looking to save.
The grass is greener?
United Kingdom?
We know that making regular savings
is tough for Generation A, but the
situation is worst for young Scots,
with almost two-thirds (63%) stating
that they do not earn enough to save.
The outlook is slightly brighter for
those south of the border: just over
a third (34%) in the East Midlands
believe that this is their main barrier
to saving.
Although the situation is tough for
many in Wales, as a result of the
high unemployment rate of 20%, it
is in fact home to the savviest young
savers, with the average savings pot
standing at £5,652. Young people
in Northern Ireland are considerably
worse off, with the average amount
of savings standing at just £1,437.
Here come the girls
Great strides have been made in
gender equality, particularly when
The rising cost of living, combined
with increasing food prices, means
that many young people find themselves living hand-to-mouth, and our
research has found that the cost of
living is even more of an issue for 1825 year olds living in urban areas: for
instance, a quarter (25%) of young
Londoners say that the main obstruction to them building a nest egg is the
sum total of their outgoings.
The future’s bright…
Despite the struggles faced by young
people living in austerity, Generation
A seems determined to overcome
financial hurdles: more than one-third
(37%) are saving into a bank or build1
http://www.abg.net/blog/2015/02/09/gender-gap-in-pension-savings-narrow-as-women-benefit-from-workplace-pension-changes/
12
ing society, and a quarter (25%) into
an ISA. The fact that 85% of young
people have at least some savings
demonstrates a desire to ensure a
safety net is in place, whatever the
economic weather.
Just 16% of young people feel that
they are getting enough support from
the Government when it comes to
saving, but, with a little boost, the
outlook for this group of determined
savers could be bright. Almost one
in five (18%) say that a save-as-youpay option, giving them the chance
to put money away every time they
spend money on a debit card, would
help them to save in the current climate. There are several of these now
on the market, including the OrSaveIt
app. The same number said that the
Government matching their savings
contributions up to a certain amount
would allow them to build a savings
pot. Generation A’s desire to save is
there.
The challenge now is to harness this
and for the industry to evolve, ensuring that there are enough suitable
products and services available on
the market to appeal to those with
low disposable incomes but a will to
win.
Conclusions
The saving priority for just under
a third of young people is to pull
together a deposit and to get onto the
property ladder (32%).
However, 42% say that they simply
do not earn enough to save, with a
over fifth (21%) saying that their outgoings are just too high to allow them
to put any aside.
Just over one in five (21%) also
think that their financial situation is
comparable to their parents’ generation when they were the same age.
Despite this, almost two-thirds (60%)
feel that the Government is not doing
enough to help them achieve their
financial goals.
The average amount of money in a
Generation A’s savings account today
stands at £3,356.
Young Money 2015
Expert View
Name:
Adrian Lowcock
Position:
Head of Investing
Company:
AXA Wealth
Bio:
Adrian has over 19 years of
experience helping and advising
clients on investments and portfolio construction. He’s a Chartered member of the Chartered
Institute for Securities & Investments and is a regular commentator in the Financial Times,
BBC and Sunday Times. Adrian
was voted the unbiased.co.uk
Investment IFA of the Year 2012.
Before joining AXA Wealth, he
was Senior Investment Manager
at Hargreaves Lansdown. Prior
to this, he worked at Bestinvest
as Head of Communications.
“The results of the report highlight the
financial stress our younger generations are under. This comes as no
surprise as they suffered more than
those already working, with higher
unemployment and low starting salaries frozen for many years, as the
economy slowly recovered from the
financial crisis.
“What is really interesting is the
change in behaviour we are starting
to see in the younger generation and
how their attitude towards saving
is changing. In spite of the fact that
many don’t think they earn enough to
afford to save a large number of them
are still finding ways to save for their
future. This is a new development we
are seeing in this age group. One of
self-moderating consumption. There
is a conscious decision to withhold
their spending in favour of saving.
This doesn’t necessarily mean going
without but rather they are savvy
spenders hunting for a bargain using
the likes of Ebay and Aldi.
“Women still suffer a lower wage
than their male counterparts but
that doesn’t stop them from saving.
Women have typically been more
cautious spenders and better savers,
but the results illustrate that there is
still the potential for men to save a
little more.
“Whilst they may continue to
expect to be able to have the car,
the holidays or the newest smart
phone, the financial crisis and
austerity has resulted in a generation who now look to save first
and not just buy on credit.”
“Pensions remain a dirty word among
young savers, but they are telling us
what we need to do to engage with
them. They want to focus on a goal,
what they are saving for and what
they get at the end of it. Goals based
investing is something we strongly
believe in at AXA Wealth as putting
the goal first provides an incentive to
save.”
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Young Money 2015
Expert View
Name:
Neil Lovatt
Position:
Sales and Marketing Director
Company:
Scottish Friendly
Bio:
Neil joined Scottish Friendly in
June 2006 as Sales and Marketing Director. Neil is responsible
for all aspects of marketing,
product development and distribution channels. Prior to joining
Scottish Friendly, Neil had 14
years’ marketing experience at
Scottish Life, latterly as Head
of Marketing Development. He
previously served six years in
Scottish Life International running the marketing operation as
Director of Marketing Development. Neil is an Associate of the
Chartered Insurance Institute.
“What a difference a decade makes!
Ten years ago I was studying reports
and watching focus groups which
showed a very different attitude to
money amongst the younger generation. With a generation that grew
up during the “things can only get
better” Blair/Brown years, saving took
a back seat as the easy availability of
debt and heady consumerism created an environment where saving was
almost regarded with incredulity.
more than learned the lesson from
their parents’ excesses. Despite the
incredibly tough times ahead, this
generation recognises the need to
save and in spite of considerable
hardships a large proportion are putting something aside for the future.
“Today, Generation A has grown
up unfairly suffering the hangover
from the “end to boom and bust”
party their parents attended.
“However the test for them will be
if they continue to demonstrate
financial behaviour which was the
opposite of that of their parents or
will they be tempted into repeating the mistakes of the past?
“But at least they look like they have
“With overall consumer confidence
rising, it’s quite possible that Generation A may finally get a financial
break in the near future.
14
“With such positive attitudes to savings given the painful lessons from
the last few years it’s quite possible
we could be rebranding Generation
A as Generation S for Saving. Let’s
hope so.”
Young Money 2015
Expert View
Name:
Andrew Baddeley-Chappell
Position:
Head of Policy & Governance
for Mortgages and Savings
Company:
Nationwide Building Society
Bio:
Andrew qualified as a chartered
accountant with EY. Since joining Nationwide Building Society in 1992, he’s undertaken a
range of roles within the Nationwide Group including internal
audit, banking, life assurance,
unit trusts, personal loans and
mortgage marketing. He
is the lead contact with trade
bodies, government and regulators on housing, mortgage and
savings matters, as well as the
Chair of the BBA Cash Savings
Working Party.
“While it is positive that 85% of young
people have at least some savings,
there remains a significant challenge
in ensuring the culture of regularly
putting away money gathers pace.
Ultimately, the financial habits we
adopt at a young age will have a
big impact on our future. The art of
saving lies in someone learning and
experiencing the associated benefits,
so it is natural that parental attitudes
will have a significant effect on offspring. But with pressure on household budgets and stagnated salaries,
this can be a difficult task.
“Indeed, the report findings echo
recent research from Nationwide,
which shows that while 37% of adults
save into savings accounts or ISAs
every month, 34% do so sporadically
and a further 20% intend to but don’t
quite get there.
“It seems obvious therefore that
we need to actively encourage
younger savers, to equip them for
the future.
“This is a view supported by the introduction of financial education into the
school curriculum last year. Nationwide already works with teachers
and partner organisations on a wide
range of interactive activities that
concentrate on the practical everyday
use of numbers, to make numeracy
relevant at the same time as boosting
confidence and skills.
15
“It isn’t rocket science to understand
that putting a little money away each
month into a savings account will
help build up a financial buffer. But
the work involved in demonstrating
this is a shared responsibility that
undoubtedly falls to us all, whether
parents, schools or financial services
providers.
“It is only together that we can
have a significant impact on
forming savings habits that last a
lifetime.”
Young Money 2015
Investing & the Economy
G
eneration A has felt the full force of the economic downturn, with young adults now less likely to be in work than
before the recession. According to the TUC, 395,000 more jobs1 are needed before youth unemployment rates
return to their 2008 level.
It stands to reason, then, that investing may not be top of the priority list for those trying to find employment; in fact
although Generation A appears to have a good understanding of investment options, 22% are not investing at all.
1
https://www.tuc.org.uk/economic-issues/economic-analysis/labour-market/labour-market-and-economic-reports/uk-has-shortfallhttps:/www.tuc.org.uk/economic-issues/economic-analysis/labour-market/labour-market-and-economic-reports/uk-has-shortfall
16
Young Money 2015
Key Facts
More than one in three (36%)
consider themselves in a
worse position than their
parents’ generation
Regionally, young people in the
West Midlands are most likely
to want to get on the property
ladder
One in three young people
view property as the most
attractive investment
Over a third (36%) admit to
being less financially savvy
than their parents
Only one in 10 (10%) would invest
due to the lower than average
anticipated returns
17
Young Money 2015
Giving something back
The impact of dwindling economic
growth in the UK has taken its toll
elsewhere, too. With many young
people struggling to stay above water
financially, there has been a perhaps
unsurprising drop in charitable donations1 from this age group in recent
years. The total amount of charitable
giving has also declined, with fewer people giving smaller sums2 of
money to charity today than before
the crash.
Ethical investments are considered a
good option for those wishing to help
worthwhile causes while building a
nest egg. However, on average, just
10% of 18-25 year olds today are
interested in putting their money into
one. Young men are slightly more
likely to invest in an ethical fund, with
11% saying that it is something that
they would consider, compared to 9%
of young women.
Members of Generation A in Northern
Ireland are the most likely to consider putting their cash into an ethical
investment fund, with around a fifth
(21%) saying that this is something
that would interest them. Least
engaged with ethical investments are
the Welsh, with just 6% considering it
an attractive option.
No place like home
The desire to get on the property ladder is highest among young adults in
the West Midlands, with 42% saying
that property is the thing they would
be most keen to invest in. But, with
house prices in the West Midlands
averaging £193,1503, the amounts
needed to save for a deposit are considerably lower than those in London,
where just 34% of young adults are
currently striving to buy.
A game of Risk
Investing in stocks and shares is
generally considered a riskier investment option, as returns are depend1
https://www.cafonline.org/pdf/Growing_
Up_Giving.pdf
2
https://www.cafonline.org/PDF/UKGivingReport2009.pdf
3
http://www.rightmove.co.uk/house-pricesin-West-Midlands.html
ent on stock market performance,
meaning that there is no guarantee
that the value of an investment will
rise. However, if it does, the results
can be impressive. It is a risky option,
but almost a quarter (22%) of those
growing up in austerity are prepared
to take a punt on it.
With Government purse strings being
tightened, is there more of a ‘devil
may care’ attitude among Generation
A?
Over a third (36%) admit to being
less financially savvy than their
parents were at their age, and
15% don’t have any savings
whatsoever.
It could be argued that, without the financial security previous generations
had, today’s young adults are ‘living
for the moment’ more than their
parents did, and that this is being
reflected in their investment habits.
Male members of Generation A are
seemingly less risk averse than their
female counterparts, with almost a
third (29%) considering stocks and
shares the best place for them to put
their money. Just under a fifth (18%)
of young female adults feel the same,
preferring instead to invest their money elsewhere.
Women are also more keen to
invest in property than men.
36% of them said they would be most
interested in investing in bricks and
mortar, while stocks and shares and
housing were almost level pegging
for young men (29% and 30% respectively).
Seize the day
But, with no benchmark, do members
of Generation A, who have known
nothing other than austerity, consider themselves badly off? More than
a third (36%) consider themselves
worse off than their parents’ generation when they were the same age,
but almost the same number (21%)
feel that their financial situation is
comparable.
Men once again proved to be more
content than young women, with 56%
feeling more or equally comfortable
as their parents. Just 47% of young
women thought the same.
18
In order to better engage Generation
A with investing, the industry should
work to encourage them to plan
for tomorrow as well as live for the
moment. It’s a difficult balancing act,
but, with the financial future of the UK
still uncertain, investing in one of the
many products available is one of the
best ways today’s 18-25 year olds
can grow whatever spare cash they
have into something for the future.
Conclusions
Ethical investments are often associated with the idealism of younger
people and considered a good option
for those wishing to build a nest egg,
while helping worthwhile causes.
However, just 10% of Generation A
are interested in putting their money
into one.
Hard up, yes, but not risk-averse: just
over one-third (34%) of today’s 18-25
year olds consider property the most
attractive investment asset class,
while nearly a quarter (22%) think
that stocks and shares are the most
enticing investment option.
Young Money 2015
Expert View
Name:
Darius McDermott
Position:
Managing Director
Company:
Chelsea Financial Services
Bio:
Having joined Chelsea on a
graduate training scheme,
Darius gained experience in all
business departments before
being made Managing Director
in February 2000. As a strong
campaigner for financial education and investor rights he has
pursued an active role in the
media, appearing on Channel 4
News, BBC 2’s Working Lunch
and Radio 4’s Money Box. He
also has a prominent presence
within the national written media
and is regularly quoted in various newspaper finance pages.
“The findings of the report show
the grim reality facing many young
people: they are simply too stretched
– primarily because of soaring house
prices – to put away enough money
for their retirement while also trying
to fulfil the primary goal of home
ownership.
“For those that can afford to save,
property investment is seen as the
most attractive asset class, with one
third of young people favouring the
sector. As well as favouring property,
nearly a quarter of respondents see
the value in stocks and shares investing, labelling it as the most enticing
investment option available to them.
“This is important because if you
look at historical returns across asset
classes, stocks and shares investing remains the most successful
long-term strategy in terms of overall returns. It is also vital for every
investor – young or old – to diversify
their portfolios, and having a mix of
property and equities helps achieve
this.
“Overall though, the main challenge
highlighted by the report echoes
the struggles facing older generations; people simply struggle to save
enough. For younger investors, this
situation is exacerbated by the fact
many young people say they are less
savvy financially than their parents
were at their age.
“More worrying are the findings
regarding ethical investing. Just 10%
of younger investors said they were
interested in ethical funds, but in
reality this is a real missed opportunity. Ethical funds can offer some of the
best returns over the long-term, and
by ignoring this sector investors could
well be missing out on top-performing
fund managers.
“This lack of understanding remains
the key issue which needs to be
tackled by future pensions policies.
It is all very well providing more
freedoms for those people approaching retirement, but more needs to be
done to help the young, especially
as they are faced with higher house
prices, and far less generous pension
schemes, than their parents were.”
19
Young Money 2015
Expert View
Name:
Adrian Cammidge
Position:
Head of Investment
Communications
Company:
Kames Capital
Bio:
Adrian deals with corporate
comms/PR and internal communications at Kames Capital. A
former winner of headlinemoney’s In-House PR Professional
of the Year Award, he’s currently
developing Kames’ media presence in Europe whilst building
its profile in the UK retail and
institutional markets. Before
moving into PR, Adrian was
Deputy Editor and News Editor
at Money Marketing, where he
won various awards including
ABI Trade Journalist of the Year.
“I’m not surprised by the results as
they reflect an age-old belief; that
funds eschewing companies which
harm the environment or society will
inevitably underperform rival products lacking similar constraints. But it
simply isn’t true.
“Over five years, the Kames Ethical
Equity Fund has returned almost
80%; double the return of the FTSE
All Share index over the same period. The fund is also first quartile over
one and three years. For the sceptically minded, it is worth noting that
this performance has been achieved
despite the fund having a ‘dark green’
screen: in other words, it cannot
invest in stocks that many other ethical funds would consider part of their
investible universe.
“That means companies involved in
tobacco, gambling, alcohol or pornography – among many other things
– are excluded. As society becomes
increasingly mindful of environmental
issues like climate change, you might
assume that the younger generation
would embrace ethical investing
more than they have. But when you
consider that only around 1% of total
assets under management in the UK
are invested in ethical funds, you
begin to understand how embedded
in the public consciousness is the
myth that green funds produce substandard returns.
“Of course, there could be another
explanation for the sector’s lack of
growth: that investors are simply not,
on the whole, interested in dedicated
ethical mandates. There may well
be an element of truth to this. But
the fact that many ‘standard’ funds
20
are beginning to adopt some of the
practices of ethical funds perhaps
suggests otherwise. The question,
then, is: how do we, as a sector, get
the message across that investors
can adopt an ethical stance without
compromising returns? It’s at least
encouraging that the respondents
to the survey appreciate ethical
investing – or at least the concept
of it. Now we need to convert those
offering broad declarations of support, particularly millennials who are
typically keener to engage with green
issues than previous generations,
into happy investors. As worthy an
initiative as Good Money Week is,
it’s clear more needs to be done on
a more consistent basis to dismantle
the misconceptions that continue to
surround the sector; and to emphasise the positive impact ethical
investing, done properly, can have.”
Young Money 2015
Expert View
Name:
Chris Williams
Position:
CEO
Company:
Wealth Horizon
Bio:
Chris Williams is CEO of Wealth
Horizon, an online service
that offers simplified investment advice to retail investors.
Calling on his two decades
of experience in the financial
services industry and his belief
that there is a need for greater
accessibility to financial advice
Chris founded Wealth Horizon to
provide advice to all investors,
regardless of wealth. As well as
being the Founder and CEO of
Wealth Horizon, Chris is also a
Board Director of the Institute of
Financial Planning.
“These findings are interesting. There
is often an idea – and this stretches beyond just Generation A – that
investing is always high risk. While it
certainly can be, stocks and shares
are more than just a one size fits all
solution and that’s a point that can
be missed sometimes. Having a risk
averse attitude with money doesn’t
automatically mean the stock market
is a no-go. There’s plenty of room
between a cash account and a speculative mining share.
“This is where financial
education can help.
“Not only can it help demystify stock
market and investment risk – but it
can also highlight the risks associated with not investing too.
“Then there’s the property issue.
The rising price of property seems to
have two effects – it makes the asset
class seem all the more attractive to
hold, while simultaneously making
it appear entirely unattainable. Of
course, house prices have considerable regional variation and so location
will always play a defining factor in
the aims of young savers.
“For those that do manage to get
onto the property ladder, chances
are it’s taken all of their savings (and
perhaps a leg up from a family member) to do so. From a diversification
point of view, putting everything into
one asset class is a risky way to go.
But perhaps with such a long time
horizon ahead, the downside risks
are less of an issue.
21
“With an economic downturn and
a lack of trust in financial services
firmly rooted, engaging Generation
A is always going to be a tough job.
You’re asking a generation to embrace and reconnect with the very
industry many hold to blame for their
current financial situation.”
Young Money 2015
Advice & Access
W
ith young people’s trust in financial services at an all-time low1, restoring confidence in the industry amongst
Generation A will not be an easy task. Ensuring that young people can access and manage their finances easily,
and without fear, is one of the biggest challenges the industry currently faces.
In order for Generation A to confidently take responsibility for their own finances and plan for their futures, it is important to understand what obstacles are stopping them from engaging as much as they could. We asked Generation A
how they view advice and access, and what could be done to make the process of managing their
finances more appealing to them.
1
http://www.smf.co.uk/wp-content/uploads/2011/07/Publication-A-Confidence-Crisis-Restoring-trust-in-financial-services.pdf
22
Young Money 2015
Key Facts
Almost one in four (22%) of Generation
A say that they would like to see more
branches open later in the evenings and
at weekends
Nearly a third (30%) of young people
would go to a financial adviser for help
Family and friends remain the most
popular source of financial information...
...with women more likely than men to
turn to family for advice
23
Young Money 2015
Back to basics
Financial education is key to helping not only today’s, but tomorrow’s
18-25 year olds manage their money
better - and steps are being made in
the right direction. Since September
2014, financial education has formed
part of the compulsory national
curriculum in England for those aged
between 11 and 16.
This approach seems to be enhancing young people’s appetites for
banking services, particularly ones
that help them reach their financial
aspirations, almost a quarter (22%)
say that bank branches staying open
later in the evenings and at weekends would be a big help, with the
same number saying that free workshops on managing money would be
useful too.
Despite gloomy predictions about
young people shunning financial
advisers in the future, our research
suggests otherwise: almost a third
(30%) say they are most likely to turn
to them when looking for financial
advice.
However, family and friends remain
the most popular source of information, with almost six in ten (56%)
turning to them when in need of
financial guidance. Women are more
likely than men to turn to their friends
and family for financial advice, with
60% of young women saying that
they would do this, compared to 49%
of men.
Bank on it
Clearly, banks have a lot of work to
do when it comes to engaging this
group. Just under a quarter (24%)
believe that their bank is doing
enough to help them reach their
financial goals.
In fact, faith in UK banks is currently
among the lowest in the world1.
Add to this the dawn of online and
mobile banking – which is steadily
1
http://www.ey.com/Publication/vwLUAssets/EY-global-banking-outlook-2015-transforming-banking-for-the-next-generation/$FILE/
EY-global-banking-outlook-2015-transforming-banking-for-the-next-generation.pdf
creating an arm’s-length relationship
between banks and their younger
customers – and there is yet more
to consider. Visits to the bank are
rarer today than in years gone by,
with young people tending to check
balances and make transfers online
rather than visit a branch.
would like breakdown cover to be
included in their account, and almost
half (49%) of young Scottish savers
would like their account to include
mobile phone cover.
A spoonful of sugar
So, it would appear that the best way
to restore young people’s faith in the
industry is to show them a little appreciation. Rewarding loyalty, offering
added extras, and providing financial
support outside of working hours is
likely to result in better engagement
among Generation A.
Ultimately, when it comes to advice
and access, it seems that today’s
young people require a little something to sweeten the deal.
But has this shift resulted in members of Generation A feeling less
loyal to their bank than the generations before them? Possibly. In light
of the ever increasing numbers of
those using online banking today, the
industry would do well to consider
what other avenues are available to
keep their customers faithful, without
regular, face to face contact.
Rewarding loyalty
Furthermore, in today’s low interest
rate environment, building brand
loyalty among consumers with less
disposable income is an uphill struggle. Generation A is ever more likely2
to change who they bank with based
on how competitive the fees are.
A number of banks offer added extras
to their customers, a gesture which
is appreciated by half (50%) of 18-25
year olds who feel that they should
be rewarded for their loyalty, and
almost the same number (49%) who
would like to see free travel insurance included in a paid for account.
Young Welsh account holders place
the most value on receiving loyalty
rewards, with almost six out of ten
(57%) saying that they’d like them
to be included in a paid for account.
Other extras go a long way too; a
third (33%) of South Easterners
2
http://www.ey.com/UK/en/Newsroom/
News-releases/14-03-10---Two-years-of-decliningconfidence-in-UK-banking-draws-to-a-close
24
Conclusions
Despite reports to the contrary3,
Generation A still appreciates face-toface time when it comes to addressing their finances. Almost a quarter
(22%) say that bank branches staying open later in the evenings and at
weekends would be the most helpful
thing their bank could do to support
them. The same number say that
free workshops on managing money
would be the best help.
The role of the financial adviser is still
alive and well: almost a third (30%) of
18-25 year olds say that this is where
they would turn when looking for
financial advice.
Just over a third (34%) would go
to their bank or building society for
advice, despite the fact that nearly a
quarter (24%) believe that they are
doing enough to help them reach
their financial goals.
3
http://www.moneymarketing.co.uk/
news-and-analysis/the-money-marketing-profile/profile-the-future-of-advice-will-be-more-telephone-andweb-based/2020686.article
Young Money 2015
Expert view
Name:
Lisa Winnard
Position:
HR and Business Services
Director
Company:
Sesame Bankhall Group
Bio:
Lisa has held a number of
operational roles within Sesame Bankhall Group and joined
the Executive team as HR &
Business Services Director in
2010. Lisa was instrumental in
the development of the Financial
Adviser School and in 2011, was
voted HR Director of the Year
at the HR Directors Distinction
Awards. Lisa’s responsibilities
are to implement and contribute
to culture within the business.
“The Young Money Report highlights
some interesting but also worrying
trends amongst Generation A.
“Education around personal financial planning seems to remain
a clear gap in Generation A’s
knowledge and understanding of
pensions and benefits.
“Whilst we have seen finance
included in the national curriculum at
secondary level, it seems there is still
more to be done to help prepare our
younger generation to manage their
financial future.
“In a digital age where information is more readily available
than ever before, we have to find
a way to educate, inform and
engage our younger generation in
personal financial planning.
“Financial institutions need to review
how they best serve the younger
generation in delivering a service to
meet their needs. By doing so, they
will add value to retain their custom.
“However, it seems that education
is only part of the solution with lack
of disposable income emerging as a
primary factor to Generation As not
being in a position to save for their
future. Whether it be saving for their
first house or saving for their retirement, again it seems that help and
25
guidance is needed for Generation
As, on prioritising how they spend
their money and to help them in
being smarter and proactive for the
future before the current advice gap
widens.”
Young Money 2015
Expert View
Name:
Jason Butler
Position:
Author of The Financial Times
Guide to Wealth Management
Bio:
Jason is a Fellow of both the
Chartered Institute for Securities
& Investment and the Personal
Finance Society. He is a Certified Financial Planner. He’s also
a visiting lecturer in financial
planning and an honorary Fellow of Northampton University.
Jason authored The Financial
Times Guide to Wealth Management: How to Plan, Invest and
Protect Your Financial Assets.
He provides expert comment on
personal finance and in 2012
was recognised by Citywire as
one of the UK’s top 100 financial
advisers.
“This report makes clear that trust in
and loyalty towards financial services companies has to be continually
earnt. The reputation of many of
these companies is still suffering from
the financial crisis and there is plenty
of work to be done before they come
to be viewed as companies young
people are happy banking with. With
the seven-day switch now in place,
which makes it easier for consumers
to change provider, financial services
companies may even need to offer
young people some tangible incentives, such as introductory bonuses
and more attractive interest rates to
build brand loyalty.
“Guiding and advising young people
on how to manage their finances
needs to be affordable, accessible
and engaging. This means financial
companies need to completely rethink their business models focused
on the customer experience and delivering good outcomes. Young people are increasingly banking ‘on-thego’ and any model therefore needs to
be flexible and multi-faceted.
“The report also demonstrates how
young people are moving away from
the traditional model of banking, with
few visiting their branches to carry
out simple transactions – instead
favouring online and even social
media to interact with their banks.
This is clearly the future of financial
services and young people seem
comfortable with this state of affairs.
26
“Therefore, the sector should look to
innovative solutions like combining
videos, animations, infographics and
simple planning tools online with
group workshops as a way of delivering interesting, engaging and cost
effective guidance and advice.
“Most young people’s needs are
really quite simple and they don’t
need traditional (and expensive) face
to face advice. They need simple
planning principles and tools to help
them make wise financial decisions.
The company that builds a service
around that simple concept will stand
well positioned to gain the trust and
custom of today’s young people.”
Young Money 2015
Recommendations
Pensions & Benefits
•
•
•
•
It is important that Generation A understands the benefits of saving more and earlier, harnessing the
power of investment growth.
The Government and the industry should work to ensure that the many people who do not qualify for
auto-enrolment don’t slip through the net.
Early education for young people is key to sound financial behaviour and investing for the future.
To inspire and empower Generation A to save for the future, we need to look at changing the whole image
of pensions and how they are communicated.
Saving & Spending
•
•
•
•
There is a strong appetite for saving among Generation A. The industry needs to be aware of this, ensuring that there are enough suitable products and services available on the market to appeal to those with
low disposable incomes but a desire to save.
Many members of Generation A, particularly young women, would benefit from a ‘goals-based’ approach
to investing: putting the savings goal first can provide an incentive to save.
It is vital that Generation A continues to adopt good financial habits, and avoids the ‘buy now pay later’
mistakes made by their parents’ generation.
We need to actively encourage younger savers, to equip them for the future. This responsibility falls to us
all, whether parents, schools or financial services providers.
Investing & the Economy
•
•
•
•
In order to better engage Generation A with investing, the industry should work to encourage them to plan
for tomorrow as well as live for the moment.
A lack of understanding of investing remains the key issue which needs to be tackled by the industry.
While the new pensions rules set out by the Chancellor will provide more freedoms for those people
approaching retirement, more needs to be done to help Generation A, who face greater financial hardship
than their parents’ generation, to invest sensibly.
Financial education is key if we are to demystify stock market and investment risk for Generation A, as
well as highlighting the risks associated with not investing.
Advice & Access
•
•
•
Rewarding loyalty, offering added extras, and providing financial support outside of working hours is likely
to result in better engagement among Generation A.
As digital natives, Generation A is comfortable around technology. The industry needs to make better use
of online resources to educate, inform and engage our younger generation in personal financial planning.
The industry needs to do more to entice and engage Generation A. Combining videos, animations,
infographics and simple planning tools online with group workshops may be a means of delivering cost
effective guidance and advice.
Report released December 2015
Photo credits: William Warby, Craig Cloutier, Henrik Sandklef, Mark Hillary, Images Money, Daniel Dudek-Corrigan, Rafael Matsunaga, Rob Bertholf and Mai Le
Designer: Lucy Watson
27
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