FCA opens debate on intergenerational finance: how industry and regulators should respond to demographic change

The Financial Conduct Authority (FCA) has today published a discussion paper on Intergenerational Differences, exploring the changing financial needs of consumers from different age groups.

The way people build and use wealth is evolving – having an impact on their financial needs. With one of the FCA’s statutory objectives being to protect consumers, it is important that the FCA approach adapts to the changing needs of the different groups within and between generations.

The FCA is posing a series of questions to start a conversation on what it and the financial services industry could do better to meet changing consumer needs.

Christopher Woolard, Executive Director of Strategy and Competition at the FCA, said:

'From Baby boomers to Generation X to Millennials - everyone’s financial needs and circumstances are evolving. It is clear each generation will have its own challenges.

'With this paper, the FCA has a specific focus on the role the regulatory framework plays in reducing barriers to intergenerational engagement with their finances.

'Now is the time to step back, consider and understand how these needs are evolving and challenge assumptions about consumer needs in the context of different intergenerational factors.'

The paper includes analysis of the ONS Wealth and Assets Survey, looking at how wealth levels of people of the same age changed between 2006/08 and 2014/16. For an individual aged 40 to 50, total wealth was less than that compared to individuals of the same age 10 years earlier. This contrasted with individuals around retirement age – an individual aged 60 to 70 had significantly more in real terms.

But the FCA cannot develop regulation that adapts to the changing needs of different generations through comparing figures at 2 points in time. It needs to understand the specific challenges these age groups face.

For example, older people are living longer as life expectancy is increasing. So Baby Boomers will need to develop new financial strategies to maintain living standards in later life. Younger people face a series of difficulties in building wealth due to the combined impact of rising house prices, unsecure employment, and student debt. So-called 'Generation X' are likely to be financially stretched, torn between the responsibility of helping older generations in later life and providing financial support to the younger generations. This leads to being unable to set aside money for their pension or to save for emergencies – leaving them open to financial shocks.

Financial needs across generations are changing so that the same products serve different purposes. For example, a few decades ago people were able to get their first mortgage in their mid-20s, and were able to pay it off before retirement. Millennials now take out a mortgage over 5 years later in life and may still be repaying it in retirement. On the other hand, Baby Boomers may turn to mortgage-type products to access money to maintain living standards or help relatives.

The FCA wants to encourage regulators, Government, firms and others with an interest to contribute to the debate on how best to meet these often very different financial needs.

By taking a closer look at the factors driving change in consumers’ financial circumstances and needs at different life stages, the FCA hopes to deepen its understanding of these issues and adapt its regulatory approach as required.

Notes to editors

  1. Discussion paper 19/2 - Intergenerational Differences
  2. Baby Boomers infographic
  3. Generation X infographic
  4. Millennials infographic
  5. The FCA will be holding a conference on Intergenerational Differences and their impact on financial services in Central London on 2 July 2019. See more information and register interest.
  6. The FCA has an overarching strategic objective of ensuring the relevant markets function well. To support this it has 3 operational objectives: to secure an appropriate degree of protection for consumers; to protect and enhance the integrity of the UK financial system; and to promote effective competition in the interests of consumers.
  7. Find out more information about the FCA.