REBA inside track: Onus is on employers to unscramble the financial legacy for the generations
The financial journeys that today’s Gen Z will take are going to be very different to those taken by their Baby Boomer, or even Gen X, predecessors. This means that passing on wisdom from one generation to the next could lead to bad financial decisions.
The principles of having savings and assets for the short, medium and long term are as true as ever for most, but wider societal and economic shifts mean these will play out differently for different cohorts.
To broadly generalise by generation:
- Baby Boomers: Many workers over sixty are likely to be retiring with some level of defined benefits (DB) pensions within their long-term savings portfolio, giving them surety of what their ongoing monthly pension will be. Plus, they are likely to have paid off any mortgage by the time they retire, so will be homeowners.
- Gen X: Those in their late forties and fifties are less likely to have any DB pension and could well have undersaved for retirement due to not being auto-enrolled into a schemes for much of their careers. They will be the first to have to make their own complex financial decisions on how to take their pensions, from annuities to drawdown. But similar to their older Baby Boomer peers, they are still likely to own a home outright by retirement.
- Millennials: Those in their thirties or early forties are more likely to have struggled to get onto the housing ladder, so many could still be paying off a mortgage, or even be renting, when they retire. This will affect the level of adequacy they need to aim for with their pensions savings. They will have benefitted from auto-enrolment pensions from early careers but might not be saving enough due to regulatory minimum contributions being too low still.
- Gen Z: Many in their twenties don’t expect to ever own a home (let’s hope this proves to be an unfounded fear) but tend to be more aware of saving for a pension than older generations. They simply don’t know where to prioritise any savings in this new emerging financial world: housing, pensions or other assets.
Not only does the content of any communications, guidance and education within workforce financial or pensions strategies need to be very different for these different cohorts, but the method of delivery has to be vastly different.
Older workers (often the generation of senior reward and benefits professionals) are used to receiving information via booklets, emails and on websites. They also tend to search out information when they need it, for example, on the company intranet or staff handbook.
Stereotypically, young workers are used to having information being fed to them (think social media) and engage in short snippets, often video, such as TikTok.
Employers not on the front foot with this shift leave a vacuum of information for this cohort of staff.
The dangers of misinformation and scams loom large for those expecting to learn all they need to know from social media channels, where there is still a dearth of honest experts with valid messages.
Life would be boring if it always stayed the same, and it is important that it evolves. It is up to reward and benefits professionals to notice the changes too, and to evolve as well.
