Millennials need more guidance on where to save their money, as it is revealed that 44 per cent of 18-34-year-olds are “confused” by the current savings landscape.
According to new research from Close Brothers and the Pensions and Lifetime Savings Association (PLSA), just four per cent of millennials have taken advantage of the Lifetime ISA (LISA), and only 20 per cent were actively saving towards their pension.
Despite being designed for young pension savers and first-time buyers, uptake of the LISA has been underwhelming, forcing the Office of Budget Responsibility (OBR) to reduce its forecast for the cost to government by an average of around 40 per cent per year.
Only 32 per cent of millennials said that they are likely to open a LISA in the future. Of the 41 per cent who said that they were unlikely to save through a LISA, 64 per cent said that a lack of information was the main reason.
This has raised concerns about the availability of accessible financial literature and savings options for the younger generation.
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“It’s concerning that 44 per cent of millennials find the UK’s savings landscape confusing,” added Nigel Peaple, deputy director for DC, lifetime savings & research at the PLSA.
“The industry and Government must do more to de-mystify savings and make it more accessible to this generation.”
The report also found that millennials were more likely to save for short-term goals such as holidays (34 per cent) and paying down debt (25 per cent), while just 20 per cent were saving for retirement, and 33 per cent for buying a home.
By contrast, saving for retirement was named as the top priority for 34 per cent of 35-54-year-olds, and for 50 per cent of the over-55s.
“With expected increases in working life and when looking at the choice from pension freedoms, [millennials] are potentially looking at 50+ years of savings and 65+ years of investment performance – a timeframe no other generation can match,” said Jeanette Makings, head of financial education at Close Brothers.
“But their difficulty is in balancing the shorter-term goals such as a house deposit with longer terms ones such as retirement.”
However, despite confusion around savings, millennials are saving more than any other generation.
The Lifetime Savings Challenge Report 2017 found that 18-34-year-olds were saving an average of £3,445 per year, compared with £3,073 by those aged 35-54.
“Savings priorities and needs vary from person to person and there are a proliferation of savings products and different providers in the market,” added Makings.
“But none of this is any use unless individual savers have the tools to manage their different savings priorities, find suitable savings solutions and know where to go for help when they need it.
“This is exemplified by the poor take-up of the Lifetime ISA. While it is certainly important and hugely welcome that the government is looking to tackle the issue of intergenerational fairness, they need to work with employers to make sure that employees know the best ways to achieve their savings goals. By developing comprehensive and targeted guidance in the workplace, employers can build a financially secure, happier, and more productive workforce.”