FCA seeks views on “intergenerational fairness”

The FCA is seeking views from “firms, consumers and other interested parties” on intergenerational fairness after releasing a paper on the topic.

The report seeks to identify the differences in the financial straits between ‘baby boomers’, ‘generation X’ and ‘millennials’, and includes a focus on the housing market and property wealth.

The difficulties which face baby boomers, according to the FCA, are that many will need to develop strategy plans to maintain their living standards into later life – requiring a need for mortgage products to assist them in benefiting from pension freedoms, or to draw down housing wealth.

Meanwhile, those in generation X are largely unable to set aside enough money for their pensions or emergency funds – with many having lower than average cash savings, and the highest amount of unsecure debt.

In addition, millennials face rising house prices, insecure employment, and higher debt, which limits their ability to save for retirement during core earning years.

While summarising that all generations have faced difficulties of some kind, the report also makes the point that, according to the ONS, house prices have increased 259 per cent in the last 30 years, while wages have increased 68 per cent in the same time frame.

The FCA poses a series of questions at the end of the paper, including a request for any opinions respondents may have regarding how existing regulatory barriers may be preventing them from offering suitable financial products.

On the paper, More 2 life chief executive Dave Harris comments: “The FCA paper makes clear that it is not only retirees facing financial difficulties, with millennials also struggling to build wealth in their lifetime.

“In recent years, we have seen wealth transfer between generations playing an increasingly important role in boosting the finances of young people. Last autumn, the Equity Release Council revealed more than 1.1 million homeowners used equity release to help their younger relatives buy their first home.

“As more first-time buyers find themselves unable to take their first steps on the property ladder, it is likely that we will see equity release benefitting this generation just as much as their older relatives.

“However, as the FCA notes, one of the key factors to continued growth and diversification of the equity release market will be finding a greater variety of funding for lenders to help stimulate further product innovation.

“Whilst the industry has traditionally been funded by insurers, this is beginning to change as we see pension schemes and wealth management firms turn towards the equity release sector as a good source of investment return.”

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