FCA to explore changing financial needs across the generations

A debate into the financial challenges facing different generations has been kicked off by the City regulator.

The Financial Conduct Authority (FCA) wants to hear feedback by August 1 to its discussion paper exploring people’s changing financial needs.

It said, for example, that Office for National Statistics (ONS) figures suggest someone aged 40 to 50 may have total wealth which is less than that compared with people who were this age 10 years earlier.

A few decades ago people were able to get their first mortgage in their mid-20s and pay it off before retirement.

People in the mid-life generation X age bracket, born between 1966 and 1980, may find themselves financially stretched, torn between the responsibility of helping older generations in later life and providing financial support to the younger generations, the FCA said.

This leads to being unable to set aside money for their pension or to save for emergencies – leaving them open to financial shocks.

But millennials born between 1981 and 2000 now take out a mortgage over five years later in life and may still be repaying it in retirement, the FCA said.

It said younger people face a series of difficulties in building wealth due to the combined impact of rising house prices, insecure employment and student debt.

Meanwhile, the older baby boomer generation born between 1946 and 1965 may have financial concerns about long-term care and helping younger generations on the housing ladder.

They may turn to mortgage-type products to access money to maintain living standards or help relatives.

The FCA said it wants to encourage regulators, Government, firms and others with an interest to contribute to the debate on how best to meet these often very different financial needs.

It hopes to deepen its understanding of these issues and adapt its regulatory approach as required.

Christopher Woolard, executive director of strategy and competition at the FCA, said: “From baby boomers, to generation X to millennials – everyone’s financial needs and circumstances are evolving. It is clear each generation will have its own challenges.

“With this paper, the FCA has a specific focus on the role the regulatory framework plays in reducing barriers to intergenerational engagement with their finances.

“Now is the time to step back, consider and understand how these needs are evolving and challenge assumptions about consumer needs in the context of different intergenerational factors.”

Tom McPhail, head of policy at Hargreaves Lansdown, said: “It is good to see the FCA exploring this kind of ‘big issue’ thinking and looking at long-term consumer needs.

“It is likely the output from this exercise will not only inform regulatory policy, but may also present some helpful prompts to firms to think about how their products and services need to adapt to customers’ changing needs.”