Today's 'fragile' labour market means thirtysomethings need more protection
There is now a “strong case” for considering the introduction of an ISA-style system for protection products because of potential benefits to the delivery of public policy, it has been claimed.
A major report looking at the attitudes of people on their mid-thirties to money and financial responsibility, published today, suggests that the more “fragile” structure of employment means that today’s 35 year-olds are more exposed to financial hardship through illness than the previous generation.
However, the report suggests today’s 35 year-olds still have very similar attitudes to their parents when it comes to home ownership and retirement.
The study, carried out for Legal & General, looks at the “intergenerational contract” on a household and family level between the 2012 generation of 35 year-olds and their parents’ generation, the 35 year-olds of 1977.
It shows that 35 year-olds today tend to have higher income levels but lower asset levels than their peers of 1977, a shift that has been mainly driven by changes in the housing market. It also suggests that families move money between the generations much more than they did in the 1970s.
The report notes that while there are financial incentives – or tax relief – for individuals to make short and medium term savings through ISAs and long-term retirement savings through pensions, there needs to be “proper recognition” of the role and value of protection products, either supplied by employers or purchased by individuals.
Legal & General, which commissioned the report, said that in some situations a small monthly premium to protect against financial loss can be far more accessible than saving a large lump sum. As a result, it suggests that a “thorough” cost-benefit analysis is carried out into the role of insurance as part of the nation’s personal financial provision, including its benefits to public policy delivery and the role of behavioural economics in encouraging appropriate take up.
John Godfrey, corporate affairs director at Legal & General, said that even though families are making new and different choices about managing their money, expectations of maturity milestones are very consistent across the generations.
He said: “This could go some way to explaining the slow pace of change in many areas of financial product evolution. Our attitudes and aspirations haven’t kept pace with the speed of the changes over the last 35 years. We hope that these questions will encourage all parties to debate these issues and review the way they think about the future and help families to meet their goals.”
Among the other questions raised by the report are whether 25 years is the right length for a mortgage. It asks that as we live and work longer, but buy properties later in life, if mortgages need to adapt to keep pace.
The report follows research published earlier this year by life insurance provider Bright Grey, whose Financial Safety Net report suggests that 28 is now the average age at which individuals begin to think about long-term financial provisions such as taking out a pension or saving in order to purchase property.
The Legal & General report can be viewed here.