This chart – from the Resolution Foundation’s Intergeneration Commission – is, indirectly, a companion piece to the FCA’s recent discussion paper on the “Ageing population”, which highlighted the needs of older generations. And it’s only one of 10 charts highlighted in Laura Gardiner’s blog – each striking in its own right – to show why intergenerational fairness is rising up the agenda.
Commentary on the Commission’s latest report has mostly focused on its political implications, But it is just as relevant for firms and regulators, and both financial products and regulatory priorities are going to have to adapt to take account of the changing needs and incentives of younger generations, who have suffered most from the fall in real incomes caused by the financial crisis.
Partly as a consequence, these younger generations are more likely to rent than own their homes, their pensions will be less generous, their spending patterns are different and more frugal, and their overall wealth is less than earlier cohorts at the same age (see other charts).
Each of these elements is well known in itself, but their cumulative impact on financial services is less frequently discussed. Regulatory concerns with the likes of pensions, mortgages, asset management and unsecured debt start to look rather different through a generational lens. Meanwhile, for firms that are able to move to a broader and longer term view of their customers, there is a significant opportunity to seize.
Taking the trends on earnings, employment, taxes, state support and housing costs together, millennials who have so far turned 30 have failed to improve on the living standards of generation X before them. That’s an unprecedented break from the generational progress we became used to during the 20th Century.