Big Dreams, Limited Means
What have the austerity generation inherited from their parents?
New research by Legal & General looks at the aspirations of the austerity generation and questions whether financial products have changed to meet them?
Legal & General have this morning launched ground-breaking new research to spark a debate about the way that Britain’s financial services industry can help to address the economic impacts of the demographic changes seen over the last 35 years.
The report, 353, looks at the intergenerational contract on a household and family level between the 2012 generation of 35 year olds and their parents’ generation – the 35 year olds of 1977. It seeks to understand how the flow of wealth between the generations has changed over the past 35 years and concludes that while 2012’s young families have changed their financial behaviour, their attitudes about home ownership and when to retire are remarkably similar to those of their parent’s generation.
• 35 year olds today tend to have higher income levels but lower asset levels than their peers of 1977. These changes are mainly driven by changes in the housing market with house prices trebling in real terms versus a doubling of salaries, with knock on impacts in all areas of life on a family and societal level.
• 353 explores inheritance, attitudes to gift giving within families, housing equity and pensions, arguing that families have taken control over their own finances and move money between the generations much more than they did in the 1970s.
• The report questions whether the current economic and demographic climate should mean that the financial services industry could help by redesigning and evolving their products.
• It recommends three questions for debate;
1. Whether 25 years is the right length for a mortgage; As we live and work longer, but buy properties later in life, do mortgages need to adapt to keep pace?
2. Whether there is an ISA-equivalent for protection; How can people protect themselves financially, as for some protection may make more sense than saving?
3. And how financial services companies can help people to manage a retirement process that could last a decade. Can more be done to move retirement timescale expectations nearer to reality, as today’s 35 year olds currently expect the same retirement as their parents?
The Rt Hon David Willetts MP, author of ‘The Pinch’ and Minister of State at the Department of Business, Innovation and Skills was present at the launch of Legal & General’s research.
Commenting on the report, John Godfrey, Corporate Affairs Director at Legal & General said:
“Even though families are making new and different choices about managing their money, expectations of maturity milestones are very consistent across the generations. This could go some way to explaining the slow pace of change in many areas of financial product evolution. Our attitudes and aspirations haven’t kept pace with the speed of the changes over the last 35 years. We hope that these questions will encourage all parties to debate these issues and review the way they think about the future and help families to meet their goals.
Polling undertaken by ComRes for the report found that his generation of 35-44 year olds have very similar views to their parents’ generation, thinking that the best age to leave home permanently is 23, the best age to move in with a partner is 27, the best age to have a baby is 29 and the best age to retire is 62. The polling also showed that:
• 35-44 year olds have had 7 jobs so far in their career.
• Half of 35-44 year olds have received financial assistance from another member of their family.
• To feel comfortable and safe, they would need just under £100,000 in the bank.
• A life changing amount of money for 35-44 year olds is £2.3m, the highest of any age group.
• 35-44 year olds would like their household retirement income to be £40,000.
The research has been welcomed by organisations involved in housing and demographic changes.
Anchor’s Chief Executive Jane Ashcroft said: “Our ageing population is already having a profound effect on the lives of us all. Policy-makers must wake up and ensure services and attitudes change to reflect changing demographics.
“The report dispels the myth that older people are a financial burden; younger people are more likely to receive financial help from their family than older people, 73 per cent of whom have never benefited from such help themselves.
“This mirrors Anchor’s own research which shows that 16 per cent of grandparents in four-generation families expect to pay for their grandchildren’s education and 20 per cent of them expect to pay towards the care of their elderly parents.
“More work needs to be done by the government, care and financial sectors so younger people can look forward to a happy old age.”
Roger Harding, head of policy, research and public affairs at Shelter, said:
“This is yet another example of how the younger generation are seeing their housing aspirations slip away from them.
“Many who are desperate to get on the housing ladder but cannot even afford to rent are putting their lives on hold, with more than a fifth of 18 – 34 year olds still living at home with their parents and many couples delaying having children.
“We can no longer ignore the unacceptable impact our housing crisis is having on all aspects of people’s lives. The government needs to show this generation they will meet them halfway when it comes to finding a place to call home.”
NOTES TO EDITORS
Polling carried out by ComRes. ComRes interviewed 2,069 adults online from 14th September to 16th September 2012. Data were weighted to be demographically representative of all British adults aged 18+. ComRes is a member of the British Polling Council and abides by its rules.