Teaching millennials how to save

It has been a turbulent month since the EU referendum and – whatever one’s personal feelings about the result and the UK’s prospects moving forward – there is likely to be much uncertainly and volatility to come.

Those most likely to be affected by our withdrawal from the EU, of course, are the millennials who, according to at least one opinion poll, voted overwhelmingly to remain. (That is not to mention the millions of 16 and 17 year olds who were not eligible to vote.)

It is also undeniable that this generation already faces an economic landscape vastly different to that enjoyed by their baby boomer parents and grand parents: locked out of the property market, subject to the vicissitudes of an increasingly global and precarious digital economy, and without the underwritten certainty of defined benefit pensions in retirement.

Avoiding politics in blogs such as this is usually a good idea, but I will say this: we should be acutely aware of the impact that Brexit, however it plays out, will have on their prospects.

We have always known that member engagement is a crucial element to consistent saving from an early age”

The counter argument most often sallied is that young people do not turn out to vote in the same proportion as older citizens. This is true and, yet, this is my promised silver lining. From recent experience, I have every reason to hope that the most profound upshot of the referendum will be greater and more informed engagement in politics amongst Generation Y. If I am right, this should also prove a once-in-a-generation opportunity for the pensions industry.

We have always known that member engagement is a crucial element to consistent saving from an early age. And so it is up to trustees and employers to ensure that we capitalise on increased awareness of the impact that finance and economics have on young people’s lives. We all know that engaging DC scheme members can be challenging.

But we also know that these hurdles can be cleared through innovative technology and creative communications, particularly where the tech-savvy Uber generation is concerned. And so, gradually, we can aim to build a savings culture to rival that in Germany and Japan.

Cultural shifts are never easy, and often take time”

Cultural shifts are never easy, and often take time, sometimes leaving lost generations in their wake. But Japan offers an instructive lesson here, too. As a lover of Japanese cuisine, I was surprised to read recently that what we think of as quintessential to their food culture is, in fact, less than a generation old. Before the twentieth century, the Japanese diet consisted largely of rice and barley, occasionally supplemented by small quantities of pickled vegetables.

It was only after the Second World War that things began to change. With the advent of American food aid and improvements in fishing and food storage technologies, the Japanese diet gradually become more varied to include fewer grains and more eggs, meat, fresh vegetables and, of course, fish. By the nineteen-seventies, Japan’s food culture had been completely transformed.

The link with pensions, you wonder? Well, firstly, Japan’s experience suggests that something we assume to be innate (childhood palate, or dislike of healthy food) can in fact be reprogrammed even in adulthood.

This should also come as a huge relief to any parents who have tried, and perhaps gloriously failed, to get their toddlers to enjoy broccoli. We assume that preferring instant gratification - the deferral of which, in favour of future gain, is inherent to saving - is hardwired into us from a young age. (Remember the marshmallow test, so beloved of behavioural economists?)

The Japanese experience shows us that this need not be the case. This, then, is an opportunity for our industry to pursue a Japan-style renaissance, with investment, structural government and industry initiatives (began with auto-enrolment) and clever use of technology, whatever Brexit holds in store.

It is food for thought, at least. If you’ll excuse the pun…

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