Redington's Rob Gardner calls on the industry to help young people, who stand to lose most after the Brexit vote.
About three-quarters of 18 to 24-year-olds voted to remain in the European Union, while three in five over-60s voted leave. It appears that young people, whose future it impacts the most, want to be part of Europe, while the older generation are broadly glad to see us leave.
Young people are already not saving enough for retirement and now employers may be less likely to be able to help them out
The relatively low turnout by young people also shows that our political leaders failed to engage with the younger generation. And clearly, given the desire for remain in the youth vote, those that did vote felt this result would have a profound impact on their future. Many will worry about their financial security, others will feel saddened by that fact that it will be harder to study, live and work in the EU in the future.
There are many reasons why people voted for Brexit, but it is clear the economic forecasts from the remain campaign did not dissuade older voters. In the days since, gilt yields have plummeted, with the 30-year gilt rate now standing at around 1.8 per cent. This means pension schemes that have not effectively hedged liabilities will have to find a way to make up the shortfall.
This is already playing out: the deficit of defined benefit pensions has leapt £80bn, putting additional financial pressure on their sponsoring employers, and ultimately, the Pension Protection Fund.
Meanwhile, the FTSE 250 – the real gauge of the UK economy’s domestic health – has had its sharpest fall since 1987. The uncertainty and widening pension deficits caused by Brexit will add to the financial burden on our domestic companies.
It will also have unforeseen consequences – for example, will employer contributions to workplace pensions decrease? Young people are already not saving enough for retirement and now employers may be less likely to be able to help them out.
Fading promise of a better tomorrow
Government after government has failed to prioritise young people. In March, the Social Mobility and Child Poverty Commission told us that Britain was running the risk of being permanently divided as a result of intergenerational inequality.
It also revealed a study that showed more than half of Britons believe young people will be worse off than previous generations. The potential consequences are diminished job prospects and rising debt.
As a nation, we are often at our best in times of uncertainty. In the pensions industry, we can act now and do our part to create a better future for the next generation.
It means ensuring an annual savings target. It means engaging with young people on financial wellbeing and the benefits of long-term saving in their world – the digital one.
It means ensuring a programme of financial education that will enable them to make the right financial decisions for every stage of their life, from buying a home and starting a family through to having a comfortable income in retirement.
Rob Gardner is a co-founder of consultancy Redington
