OpinionAug 29 2017

We need to help the 'late millennials'

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Older millennials are unarmed for financial shocks. 

Up and down the country household incomes are stretched and too few people have the Money Advice Service (MAS) recommended 90 days’ worth of outgoings in savings to protect themselves against a financial shock.

We are increasingly warned about a ‘debt bubble’ that’s sweeping the nation and it’s understandable that this is impacting people’s ability to save.

However, this poses a real problem - too many people in the UK could find themselves financially vulnerable if they lost their main source of income.

As part of our ‘Income Roulette’ research, LV= decided to look closer at this issue and see how financially resilient different groups in UK society really are. And we started with the younger generation.

We want people to be confident they’d be able to cope if they found themselves unable to work for a period of time.

Each week the media is littered with news of millennials stuck in an endless cycle of renting, being squeezed by large student loans, and relying on the bank of mum and dad – or even grandparents – to help them get by.

So it should come as no surprise that we discovered 25-34 year old renters are one of the least financially resilient groups in the UK, with nearly half stuck in a renting rut, while a similar proportion were unable to save anything at all.

In fact, a staggering two thirds don’t have the level of savings specified by MAS – almost double the national average.

This group say debt is their biggest barrier to saving, claiming student debt and credit card bills as the biggest obstacles.

Yet if they don’t have enough money put aside to cope with a rainy day, then they could find themselves struggling to pay their rent, bills and loans should illness, accident or sickness strike. 

Our research found that as much as 45 per cent of late-millennials who rent could only survive for up to a month if they lost their income, and two in five aren’t confident in their ability to handle such a personal financial crisis.

Income protection (IP) can provide a vital financial safety net in for such circumstances, but worryingly less than one in ten in this group has it, with the main barriers being that it’s seen as too expensive, or people don’t trust it would pay out.

It’s important that as an industry we dispel these myths. In reality people in this group can pay less than £10 a month for a monthly IP benefit of £1,000, and data from the Association of British Insurers has shown that over nine in ten income protection claims were paid last year.

We know some advisers have these concerns too, so to help arm themwith answers and reassurance for their clients, we’ve created an FAQ guide which can be found on our website

Another common misconception is that “it will never happen to me”, but unfortunately people can be shocked when the likelihood is laid out to them.

Our Risk Reality Calculator shows that a 30 year-old, female, non-smoker wanting to retire at 65 has around a one in two chance of being unable to work for two months or more in their working life, and one in ten chance of suffering from a serious illness.

Our calculator is a useful tool to help bring the need for protection to life and is proving a game-changing conversation starter for many advisers. The tool is free to use and advisers can find out more here.

We want people to be confident they’d be able to cope if they found themselves unable to work for a period of time and IP is one of the best ways to equip themselves for such a situation.

Advisers can play a key role in improving resilience and promoting IP, by not only educating consumers about the financial aspects, but increasingly the additional benefits and support that are provided with throughout the entire life of such polices.

At LV= for example, we include LV= Doctors Services – with free ‘instant’ remote GP consultations – together with free 24/7 access to our Health and Wellbeing line.

This enables policyholders and their families to speak to professionals about a range of subjects including bereavement, legal queries and health issues, including counselling.

Offering such additional’ benefits and services helps increase the appeal and value of policies, providing more tangible everyday protection and support, as well the much needed reassurance should at claim.

For the late millennial renters in particular, IP can be an affordable and relevant safety net, and a much-needed boost to their financial resilience.

Justin Harper is head of marketing, industry relations and innovation at LV=