HTWHPA London, UK. Three generations of women in St James' Park
FCA wants to 'start a debate' about whether regulation and financial products need to respond to the differing needs of generations © Alamy

The widening gap between generations’ finances has been laid bare by the UK’s financial regulator, which showed that people in their 40s and 50s are worse off than those of the same age a decade ago.

Members of Generation X, people born between 1966 and 1980, are also more prone to financial shocks, according to research from the Financial Conduct Authority published on Thursday. Meanwhile, baby boomers, those born between 1946 and 1965, are 38 per cent richer than 2008’s cohort of pensioners, benefiting from the effect that low interest rates had on their pensions.

Millennials, people born between 1981 and 2000, are being hit by house prices rising quicker than earnings, more student debt, and facing flexible but insecure employment that tends not to come with an occupational pension.

The FCA data showed that, in general, people in later life were better off than in 2008, while younger people were worse off, rebutting the assumption that each generation enjoys a better quality of life than the one that preceded it.

The FCA said it wanted to “start a debate” about whether regulation and financial products needed to respond to the differing needs of generations. The watchdog said that companies needed to encourage tech-savvy millennials and Generation X-ers to think about their long-term savings and insurance, while baby boomers would benefit from innovative products designed to sustain longer retirement.

For instance, while lenders are increasingly offering mortgage products that allow repayments well into retirement, younger people are not well served: 62 per cent of homeowners aged under 35 in 2017 had to turn to the “bank of mum and dad”, with products such as guarantor mortgages that could help them get on the housing ladder still just a small part of the market, the FCA said.

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Baby boomers, while the best-off cohort, must tackle the high costs related to care in later life, and how they will maintain their standard of living for longer. The FCA therefore predicted an increasing market in “later life lending” products.

“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,” said Chris Woolard, the FCA’s head of strategy and competition. “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 research is the latest to underscore intergenerational disparity, which is attracting increasing amounts of political and public scrutiny. Last month, a House of Lords committee found that the government was not doing enough to tackle intergenerational unfairness and should instead help younger people by increasing councils’ ability to build homes, improving employment rights and curbing benefits focused on pensioners.

StepChange, a debt charity, said it “wholeheartedly welcomed” the FCA’s work.

Peter Tutton, the charity’s head of policy, said: “The drivers of problem debt, as well as the drivers of wealth, are different for different age groups, which is why we all need to be on the front foot in anticipating how to reduce the risk of problem debt occurring right across the generational divides.”

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