Young people and pensions saving: options for reform

Transcription

1 Young people and pensions saving: options for reform Craig Berry International Longevity Centre -UK with thanks to Jessica Watson & Valentina Serra

2 Employment Youth unemployment, record levels, exacerbated by the economic downturn Declining value of a degree; a must-have rather than a boost? Young and old earnings gap is stable, but rise in in nonstandard employment

3 Percentages In education Not in education Contract includes a period of training * 6 6 Contract for probationary period * 7 8 Could not find a permanent job Did not want a permanent job Some other reason ONS Labour Force Survey 2008

4 Housing Age of first time buyers is increasing Average age of first-time buyers in the UK not receiving financial support from their family Mortgage debt value rising faster than income Chaotic housing pathways The importance of family support Source: Council of Mortgage Lenders

5 Spending Young people seem to spend a higher proportion of disposable income Large numbers with credit cards, overdrafts 1 in 4 aged has borrowing which is greater than 300 per cent of their monthly income

6 Households in arrears Source: Wealth and Assets Survey 2006/08

7 Savings Young people are saving in increasing numbers (success of ISAs?) But we do not necessarily know how much they are saving They are saving for short term rather than retirement

8 Pensions (the conventional wisdom) Young people prefer to live for now they think about later life negatively or not at all Limited knowledge of pensions Less likely to be in an occupational scheme More likely to be enrolled in a defined contribution scheme, with lower contribution rates

9 Control Cultural norm of independence Job crafters Comfortable with responsibility for financial products Value choice and portability in pensions

10 Whether employers should automatically enrol employees in their pension scheme Should Should not Don t know Clery, 2007

11 Postponement of adulthood Lifestage or cohort a moot point? Today s young people establish careers, start families and set up homes at later ages a postponement of full adulthood? Habits form during transition which may be difficult to break

12 Breach of contract Funding our own retirements Moving away from risk-sharing and redistribution Embodied by rise of DC And entrenched by NEST Demonisation

13 2012 opportunities The incentives on offer are attractive to young people Portability Online access to account information high rates of self-efficacy Auto-enrolment should reduce effort but not control

14 Beyond 2012? Save more tomorrow? Lower contributions until full adulthood established Plan B in case of large-scale opt out offer liquid savings account below certain age (i.e. 30) IF ANYONE S GOT A PLAN B, NOW WOULD BE A GOOD TIME

15 Financial citizenship Helps young people save for a pension Reconfigures state/individual relationship based on lifestage

16 Contested meaning Synonymous with responsibilization and individualization Consistent with recent use of citizenship? Rights as well as responsibility: a concept that recognises the significance of the financial system to everyday life and confers a right and ability on individuals and households to participate fully in the economy and to accumulate wealth (Leyshon) Democracy and accountability

17 Financial citizenship, young people and pensions FC most relevant to young people FC-based interventions by necessity targeted at young people Importance of matched saving Support pensions saving in particular later in the lifecourse Transparency and accountability more important to young people?