Royal College of Physicians of Edinburgh, 9 Queen Street, EH2 1JQ Edinburgh, 16:00, 14 June 2011

This event explored the financial circumstances and future economic prospects of young people, focusing in particular on the capacity and propensity of today’s young people to save for retirement.

A keynote address was followed by a panel debate and audience discussion.

Population ageing, leading to a declining old age support ratio, is likely to undermine the ability of the state to fund a decent standard of living for all individuals in later life. This has been exacerbated by the fiscal crisis. Increasingly, individuals will need to consider how to provide for themselves in retirement, if they are to avoid significant drops in standards of living.

Given the end of ‘jobs for life’, the persistence of youth unemployment, the difficulties associated with entering the housing market for young people, and the withdrawal or closure of defined benefit pensions schemes, there are valid concerns about the ability of today’s young people to meet this challenge. Under-saving is a significant problem in the UK today, especially among young people. Today’s young people, the first generation to have grown up with the internet, are renowned as a highly educated and demanding cohort. They are also deemed to be relatively irresponsible regarding financial issues.

However, there is evidence that today’s young people are in fact more likely to be saving than older cohorts and previous generations – but they are not necessarily saving sufficient amounts. Furthermore, they are not necessarily saving for retirement – preferring to save to fund large items of current consumption, or to get onto the housing ladder.

The government has been active in incentivising pensions saving, through retaining the previous government’s flagship NEST scheme, and declaring its intent to end the spectre of means-testing in the UK pensions system by moving towards a single, flat-rate universal pension. But will NEST provide adequate retirement incomes for all – or will young people ‘opt out’ of NEST in large numbers? Do young people understand enough about pensions for means-testing to act as a significant disincentive?

The event also saw the launch of a new report by Dr Craig Berry of the International Longevity Centre-UK titled Resuscitating Retirement Saving: How to Help Today’s Young People Plan for Later Life. The report, which has been sponsored by Prudential, looks at the financial and economic circumstances of young people today, the socio-economic trends young people will face in coming decades, and what we can learn from behavioural economics to encourage young people to save more for their own retirement.

Some of the questions the debate addressed were:

  • What will the future look like for today’s young people?
  • What type of financial education will be most effective, and who is best placed to provide advice to young people?
  • Following the financial crisis, how can we restore trust in financial services?
  • How can we nurture a savings culture?
  • Can we ensure that that NEST is successful in increasing pensions saving rates?
  • Should young people be encouraged to save for a pension rather than invest in property?
  • Are today’s young people a ‘jilted generation’?
  • What more can we learn from behavioural economics?

Agenda from the event:

Welcome from Chair, Stewart Ritchie

Craig Berry

Lawrence Churchill, Chair, NEST

Wendy Loretto, University of Edinburgh
Tim Fassam, Prudential
Liam Beattie, former Vice-Chair of the Scottish Youth Parliament
Tam Baillie, Scotland’s Commissioner for Children & Young People

Panel debate