UK millennials want greater access to social finance products, more hard-hitting messages around the retirement funding challenges they face and better education around financial matters, according to a report from Cambridge University.
The report finds UK millennials – aged between 15 and 25 years – would allocate 40 percent of their portfolio to social finance products, a far higher allocation than is currently achieved through typical workplace pension schemes.
The figures come from a survey of millennials across six countries globally – Australia, Brazil, Japan, the Netherlands, the UK and the US – that sought to explore how the retirement savings industry could do more to engage with younger savers. While millennials want to invest in social, SRI and ethical products, 95 per cent of respondents globally said they feel that pension funds and insurers provide limited, poor or no options for investing in social finance products.
The research Generation Lost: Engaging Millennials with Retirement Saving., carried out by a team of students from Cambridge Judge Business School, University of Cambridge and BNY Mellon, found 42 per cent of UK millennials estimate the size of the fund they will need for retirement by taking a “blind guess” rather than basing it on industry data, with a further 51 percent taking an “educated guess”.
Across all respondents, 77 percent want to be told the “stark reality” of their post-retirement finances although attitudes vary widely from country to country, with only 48 per cent of Brazilian millennials wanting more honest marketing messages about the retirement challenges they will face, compared to 90 percent of UK millennials.
The research also found 70 per cent of UK millennials thought they would save more if their pension allowed multiple lifetime withdrawals.
Paul Kelly, a graduate from Cambridge Judge Business School and joint-lead researcher for the study says: “High student debt, low job security and low global growth mean millennials face a different set of financial challenges than the baby boomers and Generation X.
“It is therefore crucial that financial services providers understand how they can empower millennials to save for their retirement.”
BNY Mellon head of insurance m EMEA, APAC & LatAm Paul Traynor says: “Without a new approach, we face a real risk that the millennial generation will become Generation Lost – lost both to the financial services industry and in terms of its own readiness for retirement. “Millennials say they want more meaningful engagement with insurers and other financial services providers and to be told the truth about how poor they may be in retirement if they do not start saving early. They are ready to hear more confrontational, honest and realistic messages about the challenges they face in providing for their retirement.”
Newton Investment Management head of responsible investment Sandra Carlisle says: “Responsible investment should be more actively marketed to millennials.
“Just because millennials have little understanding of responsible investment now, it doesn’t mean that they wouldn’t invest in this way, given the opportunity. Financial services companies should develop and educate millennials on responsible investments and social finance, and make it easier for them to allocate a percentage of their retirement savings to this segment. An all or nothing approach will put some investors off.”