Saving for a property is more important than saving for a pension amongst young people, according to joint research conducted by the CISI and financial services consultancy MRM
The survey, based on a poll of 70 millennials at a joint MRM and CISI event at America Square conference centre in London, found that 46% believed that young people should be focusing on saving for a property, while 33% thought they should be saving for a pension.
This represents a significant challenge for the pensions industry, which has traditionally struggled to attract younger savers. Based on
analysis by Deloitte, the UK ‘savings gap’ is set to reach £350bn by 2050, which roughly equates to a savings shortfall of £10,000 per year per person.
The research comes at a time of change for the financial services industry. The new Lifetime ISA (LISA) offers flexibility for under 40s looking to combine their pension and property savings in one place. Auto-enrolment is also set to reach more and more UK employees this year.
Sophie Robson, Consultant at MRM and author of MRM’s Young Money report, said: “A lot of work has been done to help engage younger people with pensions and saving in recent years, with LISA and auto-enrolment, but this research shows how much further there still is to go. The idea of owning a house is deeply entrenched in the national psyche, and while house prices remain as high as they are and wage growth stays sluggish, the quest to get on the property ladder means pension saving is set to take a back seat for some years to come.
“It will be interesting to see whether these attitudes change as auto-enrolment kicks in and if the take-up of LISA proves to be high. However, there is a lack of disposable income of those in this age group. This, coupled with the adverse economic climate, means there is a real risk that these initiatives will, at best, trick people into thinking they are saving adequately for their retirement. At worst, it could distract them from the real task of saving little and often.”
"The quest to get on the property ladder means pension saving is set to take a back seat for some years to come"Rebecca Taylor CFPTM Chartered FCSI, CISI Board Director and Managing Director of Aurea Financial Planning echoed this: “As a financial adviser, I see a lot of people in their fifties, but we see far fewer people in their twenties. While this is understandable – young people often lack assets and disposable income – I can’t help thinking this is a real missed opportunity for these young people.
“By taking a proactive approach to their finances early on, they can build some really solid foundations by saving and investing small amounts regularly. These simple steps can make a huge difference to their chances of a comfortable retirement. Early engagement with money management is key to plugging the savings gap and enhancing young people’s prospects post-work.
“Those that take responsibility and plan accordingly are undoubtedly in a stronger position for the future. However, as a profession, we need to innovate to ensure that access to a professional planner is easy and affordable.”
One such initiative is Financial Planning Week 2016, a national consumer awareness campaign organised by the CISI, week commencing 6 June, dedicated to demonstrating the importance of true financial planning. Financial planning firms across the country will be offering free consultations during the week, as well as a host of other resources that can give younger savers some direction when weighing their options.
If you'd like to register your interest in Financial Planning Week 2016, email fpweek@cisi.org