Mounting levels of student debt are having an overwhelming impact on young people’s finances in the UK, with the average student owing £42,500 when they graduate. Three-quarters of graduates since 2011, when the government scrapped maintenance grants in favour of a new loan system, will never fully pay off their student loan – and even high earners anticipate paying £40,000 in interest – according to data from the Institute for Fiscal Studies (IFS), cited by
City AM’s Alys Key. Furthermore, poorer students are expected to leave university with an average of £57,000 in debt as they are forced to borrow more for living costs.
While the mounting debt is certainly cause for concern, further data from telecommunications service provider Telstra casts the financial position of UK millennials in a much more positive light – naming the age group as the most lucrative demographic for the financial sector. According to Key, the new study shows that “the average total value of deposits and lending ['wallet size'] held by a UK millennial is now 40% bigger than other adult demographics”.
This extends to mortgages, with the article citing a study by L&C Capital that says that 92% of 18–34 year-olds have opted for mortgages with a repayment plan, as opposed to interest-only, in comparison to 68% of over 55s. Furthermore, 69% are more likely to choose a fixed-rate mortgage, as opposed to a tracker mortgage.
City AM article
Adapting to a new marketplace
Due to their spending power in relation to financial product sales, millennials could arguably hold the key to the future of the banking sector. Telstra’s analysis of 27,000 global consumers shows a difference of $23,281 between average UK wallet sizes, in favour of the younger 18–34 age group. Millennials have become “lead indicators of performance for financial institutions”, Rocky Scopelliti, global industry executive for financial services at Telstra, tells
Finextra.
Their record consumption of mobile digital, too, will heavily influence future financial products. “As digital challengers continue their relentless growth in the UK market, leveraging programmable disruptive technologies to transform and compete against new breeds of organisations is an imperative for traditional institutions,” adds Scopelliti.
Ashok Vaswani, CEO of Barclays UK, who is also quoted by
Finextra, agrees that a move towards a more mobile approach is a “winning strategy” for all banking customers, not just millennials. The mobile first approach is making banking “easier, more convenient and more intuitive for customers as we connect them to new services and value”, Vaswani explains. According to a comparative study of UK bank account data, Barclays has the highest share of millennials in its customer base, at 42%. These customers are more likely to use mobile banking versus traditional methods, with 70% of individuals doing so on a monthly basis.
Finextra article
Appealing to the older generation
But, with new financial products and services being increasingly geared towards millennials, the older generation is feeling neglected. Despite over 50s spending 50% more on pensions, savings and investments compared to under 50s – £150 per month versus £100 per month – "59% of people aged 50 plus say brands aren’t interested in them", with one in ten saying they feel ignored by the financial sector the most, according to data from insurance firm SunLife.
40%
The average total value of deposits and lending held by UK millennials is 40% higher compared to other adult demographics
The research, referenced by
FT Adviser’s Stephanie Hawthorne, also notes that over 50s spend a larger percentage of their income on financial products – 19%, compared to 14% for under 50s. According to Dean Lamble, CEO at SunLife, who is quoted by
FT Adviser, spending amongst the older demographic – who make up a third of the UK population – is growing at three times the rate of under 50s. “There is such a huge opportunity here for brands, but many are reluctant to make their products appealing to people over 50, or don’t know how to,“ says Lamble.
However, independent financial advisers have rebutted these claims, noting that over 50s are typically well catered for. Robin Melley, a chartered financial planner at Matrix Capital, sees a lower demand for financial planning and financial advice from the under 50 age group, with the exception of clients’ children, telling
FT Adviser that there are “many product providers that offer financial products and services that target the needs of the over 50s”.
Andrew Pennie, head of pathways at Intelligent Pensions, agrees, arguing that “financial services brands have become increasingly focused on the over 50s, particularly since the launch of pension freedom and choice”. The SunLife research is “based on averages and perhaps disappointingly highlights the difference between the haves and the have nots in older age”. However, Pennie does admit “there is always more that can be done to engage more effectively with this and other audiences when it comes to financial services and financial education”.
Balancing the requirements of the younger and older generations will prove to be a significant issue for the financial sector as it strives to cater for an ageing population alongside more technologically minded millennials.
FT Adviser article
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