A group of providers has launched a project to stimulate change in consumer attitudes to saving to help avoided what it describes as ‘an impending consumer financial crisis’.
A damning report on the state of the nation’s finances published by the project today argues the unequal distribution of wealth in the UK means a large proportion of the population have no scope for saving. It found the bottom 20 per cent of consumers owns less than 1 per cent of the UK’s total wealth while the top 20 per cent owns 62 per cent.
Painting a bleak picture of the nation’s finances, the report also found a third of all households have no money left at the end of the month, with 34 per cent of all households having less than £250 in savings and over half have less than £1,500. Meanwhile, the first time buyer age has increased steadily from 24 in 1970 to 28 in 2000 but leapt to 37 in 2013.
It also says middle income consumers in their 40s and younger are poised to experience pensions that are around 30 per cent lower than individuals in their 50s or older as a result of the shift to defined contribution and less generous State pensions, even if they have contributed or saved as much as earlier generations.
It says the baby boomers will be the last generation to enjoy financial security during their lifetime, especially in retirement, unless behaviours change and action is taken. People under 35 will have only two-thirds of the time to save twice as much money to provide the retirement income their grandparents enjoyed, it argues.
The project is calling on the government to build on the new freedoms set out in this year’s Budget and take forward long-term policies to avert a looming social and economic crisis. It will develop strategic proposals on how to enhance consumer financial wellbeing by September 2014. It will then start looking at ways to help people change their financial behaviours so they can achieve greater financial security.
The body says this is the first time that the financial services industry has spoken with a single voice and worked with organisations that represent the consumers’ interests to create solutions that meet their needs and aspirations for the future.
The Savings and Investments Policy project is being overseen by Tisa and directed by an executive committee of 22 financial organisations including Aviva, Axa Wealth, BNY Mellon, Barclays, BlackRock, Charles Stanley, Citi, Fidelity, JP Morgan Asset Management, Henderson, Intrinsic, L&G, Lloyds Banking Group, Nationwide, NatWest, Northern Trust, Old Mutual, Pinsent Masons, Simply Biz, Threadneedle Investments and Zurich. Further input is being received from bodies including the ABI, Association of Professional Financial Advisers, The Money Advice Service, The Pensions Advisory Service and the British Bankers Association.
Savings and Investment Policy project chairman and Blackrock head of UK retail Tony Stenning says: “Fear, confusion and a lack of understanding is exacerbating this problem through inactivity, apathy and disengagement. Today’s pensioners are benefiting from the ingrained savings habits and more generous pensions of the past – but the future is going to be different.
“Over the past 25 years both the State and employers have had to significantly reduce the levels of income that people can expect in retirement. This means people need to save more just to maintain the same standard of living as their parents, meanwhile given increasing longevity their retirement pot will also have to work much harder to support their longer lives. The generations impacted most are those aged 35 or younger as they face rising housing costs, less generous pensions and are saving less. If nothing changes are they destined to benefit from longer, healthier lives, yet suffer financial hardship in old age?”