Family financial security is reducing, according to independent research from Smarterly and a study from Legal & General. Smarterly’s research shows that one quarter of young employees expect to financially support their parents in later life, while Legal and General’s new report shows that the Bank of Mum and Dad is currently the 11th largest mortgage lender in the UK.
Steve Watson, head of proposition at Smarterly, says, “The new reality for younger people – rocketing housing prices, low pay and a culture that normalises getting by on credit – is eroding financial security for younger and older alike. According to Legal & General’s report, the Bank of Mum and Dad is involved in more than a quarter of million (259,400) property purchases. Yet, we’re in a sad situation where over a quarter of millennials have added ‘Mum and Dad’s finances’ to their own list of money worries, and fewer than a tenth (9.27%) see their retirement funds as the biggest financial concern.”
“Naturally, there are lots of financial hurdles and opportunities for most young people before even thinking about their own retirement and obviously some are lucky to have support from their parents. But later down the line they may find they need to repay the favour.”
Indeed, 33.2% of 18-35 year old employees receive no financial support from their parents or family and would welcome more support on making savings for the short to medium term, according to the new findings from Smarterly, which helps employees build healthy savings habits.
Watson adds: “People – young and old – need to be supported throughout their working lives by workplace savings, not just pensions. In isolation, pensions are no longer enough to support financial wellbeing. Although retirement is still the final destination, there are many other stops along the way. The key is for people to shift to accessible savings that can be used for all events during their lives. Employers are the first port of call to help them do this”.
Michael Johnson, Research Fellow for the Centre for Policy Studies and Corporate Affairs and Policy Adviser to Smarterly, adds:
“We need to tackle intergenerational inequity at its roots. Millennials are having to support an increasingly ageing population by funding the rising cost of health and social care, in addition to a panoply of pensioner benefits. Today there are 3.5 people of working-age for every pensioner; this is expected to fall to 2.5 by 2036.
“Consequently, many millennials are likely to experience a lesser quality of life than that of their parents. The traditional savings vehicles, including pension pots, no longer serve their needs. They require access to much more flexible, innovative savings schemes.”
The independent research takes into consideration views from 1248 employees and 508 HR professionals in UK businesses.