Why have young people developed a nihilism around the state pension?

0:12Welcome to the latest Margin Notes podcast with me Simini Kuriakku, editor of FTAdvisor. Regular listeners will know we've been focusing a lot of attention on the intergenerational wealth divide over the past 12 months or so. So in previous podcasts, we have discussed ways to help young people get onto the housing ladder with or without the family bank. We've looked at how young people are leaving big life decisions to much later on in life because of money worries. And we've also explored the psychological and emotional beliefs that young people might attach to their financial health. With me in the studio today is our special guest Iona Bain.

0:49You will know her as an award-winning presenter, broadcaster, columnist and author and podcaster who specialises in personal finance. And some of you may even have bought one of her books. The latest one is called Own It. I am also honoured to call Iona my friend. You may not know this, but back in 2011, while she was starting her Young Money blog, Iona was also a reporter on the FT Advisor news desk while I was news editor. I don't know how old that makes either of us. Maybe it just makes us experienced. Quite. But it has been a delight to see her make such a positive impact on millennials and Gen Z.

1:24Iona, welcome to the studio. Thank you so much for having me. It's such a pleasure to be back chatting to you. Fantastic. Well, there's still jobs on the news desk, though. I will bear that in mind. Of course, of course. Well, let's get stuck in, though. What, if anything, has changed for young people financially over the past 14 years since you started your blog? Well, I would like to say that there has been a big transformation in that time, but that would be a lie. That hasn't been the case. And actually, things have stayed depressingly similar to when I first started writing about young personal finance back in 2011.

1:59and when I started my blog I had this very naive optimistic dream that perhaps just bringing that conversation out into the open and also doing it from a young perspective and being willing to do crazy things like go on tv and go on radio and raise the profile of millennial money would go some way towards getting it on the agenda making sure that it was at least there in the mix when decisions were being made about how to balance the economy. But that's not really happened. I think lip service has been paid to that whole issue. But if we look at the number of young people who are still struggling with their housing costs, still struggling to make their pay last all month and cover all their expenses, still struggling to move up the housing ladder and save into their pensions and long term nest eggs, I think we can see that progress hasn't been particularly good.

2:58And I really don't know why we haven't achieved more in that time period, whether it's because we've got this political imbalance, whether it's because young people have not been politically active enough, whether we have just ended up with very short term decision making in the Treasury, whether some of these problems are just really intractable. I don't know. But either way, unfortunately, we just haven't seen that much progress since I first started writing about this whole issue 14 years ago. That sounds really depressing. When I think of sort of 2011, it was just before auto-enrollment. So we had all this positive news about, you know, let's get everyone invested in pensions.

3:37We've seen millions of people become auto-enrolled and millions more people and young people saving. But it still doesn't help the here and now, does it? Inflation is still a problem. The house price to income ratio is still a problem. Absolutely and also in that time I've seen a new nihilism develop around the pension which has been quite interesting. There is now this very widespread belief that there will not be a state pension for our generation. Oh, I believe that my son won't have one. Well, this is it. When did this come about? Because we don't necessarily think that there won't be an NHS in the future.

4:12I mean, there may not be. But it just seems to be the case that it's been baked into our assumptions and our attitudes that we are spending on the state pension now in a way that is not sustainable. And I know that there's a whole live debate around that. I know that Steve Webb, the architect of the Triple Lock, would say that it has actually been a really important bulwark against pensioner poverty. but I think we are starting to understand that there is something wrong with how we're spending at the moment so that we're storing up more problems further down the line and that will make it difficult for our generation to retire on the state pension alone.

4:45Yes indeed and I've heard quite a lot of young people on social media describe it as a Ponzi scheme or an inverse Ponzi scheme of the smallest proportion of the society that the working population are shoring up the pensions of the largest portion of the population. which shows that actually younger people do have a fairly sophisticated understanding of all this even if they are taking it perhaps to the logical extreme which is there will be no state pension and unfortunately that isn't always accompanied by young people thinking well therefore I must do something about that I must try and save more into my workplace pension but to be fair that could be because there just isn't that much extra money to put into a workplace pension yes of course and And, you know, not buying avocados and lattes, it really isn't going to sort of cut the ice.

5:30It isn't going to touch the sides in many cases, no. Do you think that young people's attitudes to money are different across the generations, across Generation Z and millennials? Yes. And I am reluctant to generalize too much because, you know, all generalizations are useless, including this one. That's a good one. It's a good one. But I think we can look at trends. And I think there is definitely a difference between millennials and Gen Z. Millennials were more optimistic and one might say naive, thinking that if they went to university, if they worked hard, if they studied hard, if they got themselves a relatively good starter job, moved to a big city, whether that's London, Manchester, Leeds, whatever it might be, and just paid their dues, then maybe they could live the same dream that their parents did.

6:16And they have found themselves to be disillusioned, illusion realising that actually you can tick all those boxes and still really struggle to make those typical markers of kind of middle class aspiration happen. And I think that's been a big disappointment for millennials because we were brought up feeling like the world was our oyster. Whereas I think Gen Z are much more battle hardened. They came of age during lockdown. Yes. They have matured into a world that already feels pretty chaotic from all sides and an economy that doesn't necessarily hold that much promise. And they have perhaps seen what millennials have done at work, how much we've worked our socks off, how much we've saved and still not felt like we've really got that much further in life.

7:07And they've gone, well, you know, we're going to do things slightly differently. Maybe we're not going to give up our entire lives for our work. Maybe we are going to have a bit more balance. Maybe we are going to spend a little bit more in the here and now and enjoy ourselves because nothing is guaranteed in the long run anyway. If we put more into our savings, put more into our pensions, save for a house, all the goalposts could be moved in another five or 10 years time anyway. Now, I'm not saying that's the right attitude, but it is a very common attitude that I'm seeing. And hand in hand with that is a greater willingness to take risks.

7:36So you're seeing Gen Zs much more willing to invest their money in the stock market, which I think is promising and is interesting and something that potentially the industry can work with. But of course, it comes with lots of booby traps. Of course, yes. And one of the big booby traps, of course, was the whole GameStop episode. You know, people in lockdown, not spending, not going out. A lot of young people thought, well, let's start investing. But their investing was a lot more speculative than actual sort of educationally investing. They were sort of speculating on GameStop. They were using trading apps, maybe even getting into crypto because it was seen as something they could do.

8:13Yeah, I could almost say that it was like gambling more than investing. Yes, I think my listeners, the advisors would definitely say that. But again, it's that attitude, you know, that they were watching TikTok and they were seeing the influencers. Perhaps I think influencers are more attuned to Gen Z than to millennials. perhaps millennials a bit more skeptical of the influencer but perhaps gen z are looking at this and thinking well you know what i could put all my money into crypto and buy a house you know this is a yeah and i i feel like the the influencers that have really popularized this notion of investing as a way to get rich quick are tapping into that that gen z feeling that that nothing works anymore and that a lot of the old rules and standards don't apply.

9:03And I think that's something that we have to be aware of as those older generations who grew up with a lot of shibboleths drummed into us about investing. You must make sure you diversify. You must make sure you invest for at least five years. Don't touch your portfolio after you've put it together unless you need to do certain tweaks to it. And, you know, just take this very sensible long-term approach and it will work out okay for you. And I'm not surprised that Gen Z are questioning that. even though I think that that can lead them down a path of doing things that are just manifestly not responsible.

9:37And I don't say that in a judgmental way. I don't say that as if I'm being some sort of, you know, finger wagging mum here. But I feel that for this generation, they have money in the markets that they cannot afford to lose. That's the part that scares me. Yeah, absolutely. And whilst they can definitely invest that money in a way that's responsible, that could even potentially create a house deposit one day if they play their cards right. I do think that if they can take a step back and maybe see through a lot of the social media landscape and understand that that advice is often quite self-serving, that the people giving it are really talking up their own investments more than they're trying to help you.

10:17Of course, and you only see the success stories as well. You don't see people sort of saying, well, look what I did. I lost all this money on this particular thing. please learn from my fail they just see the nice car or the the fancy jewelry or the person flashing the rolex watch exactly and it might even be borrowed well exactly and of course all of this is on a continuum with fraud as well and what i find quite scary of and this is true of people of all ages something i come across a lot in my work is that people going on social media who see these adverts that are promising massive returns in a short space of time if only they'll put a certain amount of money forward.

10:55Why do those scams work? It's because of a basic lack of investment literacy that the general population has. But that's not just the case among younger people. Older people can fall victim to that too. And so we just need to have so much more awareness of what the stock market could possibly do if you're investing in the right way and what it cannot do. And if people understand that it cannot get you these incredible returns in a short space of time, then they're not going to be as susceptible to scams. Absolutely. So what sort of things could our listeners, the financial advisors do? Because clearly Gen Z are not necessarily the kind of cohort that a lot of financial advisors would be advising.

11:34They don't necessarily always fit the wealth profile, but they might one day. So what could advisors do? What sort of information could they be putting out there just to kind of help steer young people who might be just browsing casually on on the internet i'm always always uh very reluctant to to tell advisors what to do because i'm not an advisor it's a really hard job and there is also the very standard pat advice to just get on social media and create more content there and and then the kids will find you and you know you've got your clients to serve you've you've got all your other business priorities you You know, creating that content with very little upfront benefit is easier said than done.

12:23And I say this as someone who has to do content creation for a living, and it's not something that I relish either. Having said that, you do have to meet young people where they are. And why should you meet young people where they are? Well, yes, I do think there is always that possibility they will become your clients of the future. The fact that they are going on social media and getting this advice from elsewhere shows there is an appetite. You can work with that. If they were completely disinterested in this whole area, then you could say, well, there's no point. Exactly. It's a fruitless exercise.

12:54But the fact there is such interest in investing and the fact that, as we've said, there is some awareness of the problems with the state pension. These are things that the advisor community can work with and it can stand as a kind of beacon of sense in this crazy world. and what I'm seeing more and more is influencers getting financial planning or financial advisor qualifications yes and that to me indicates that they understand that there is a trust and credibility issue with influencers and if they can get those qualifications people will pay attention and listen to what they have to say more well the good news is that advisors already have those qualifications plus they actually do have experience and I have seen quite an interesting debate which I'm sure you're closer to around you know it's all very well getting the qualifications but what if you've never actually had experience advising people surely that is the thing that gives you the edge and and will allow you to say things with with that kind of firsthand authority exactly and advising people through a downturn because a lot of people until sort of 2020 um from you know say 2011 to 2020 they hadn't experienced a market shock no and then suddenly a market shock came and even some advisors saying this is the first time i've dealt was a market shock yeah um but but a lot of advisors who'd seen it before said this is what we have done before this is what to do keep calm don't panic these are the plans this is how we're doing it this is how we're going to get you back on track if you're not already still on track so i think that experience of knowing what's happened before knowing the experience of the bad times actually helps people regardless of what you're going through because the bad times will happen i think that's the only thing that we can be sure of yeah um and i'm interested to ask you actually do you think that therefore you still need to have that personal connection with people um and outsourcing it all to you know chatbots to ai to apps to digital solutions is is you know it's obviously going to save you time it's going to save you money it's potentially going to help you reach more clients but that you do always need to maintain that personal connection as well That's something that I think, but maybe you disagree.

15:03I absolutely do think you need that human touch because AI cannot do what the advisor does, which is, you know, when a client rings up and they've experienced a bereavement, AI can't speak or relate to that person with empathy and compassion. You know, when someone rings up and maybe they're going through a vulnerable situation in their lives that makes them perhaps temporarily vulnerable, the advisor will be able to sort of pick up on that and very intuitively ask those questions. AI can't do that. AI can't comfort a grieving widow. It can't help someone who's really distressed at the point of making a claim.

15:38So you will always need that human element. But AI, like you said, if you had an AI algorithm on your website that maybe someone could come and ask an FAQ, you know, what sort of, if I've got 10 ,000 pounds, how do I go about setting up an ISA, for example, just to say you can set up an ISA in this way or in that way. And regardless what might happen in budgets that may or may not be coming up very shortly, you know, this is, these are the limits, this is what's going to happen. And it just gives people a little bit of knowledge and you don't actually have to do anything other than make sure the input is accurate, that the output is accurate.

16:17But that gives people who may not want to come to you for full-blown advice they may not want to be able to or or they may not feel financially capable of paying for that full-fled advice gives them something to look at so I think there is that element where you can use the AI but I mean I mean are you worried about AI is there an AI owner out there well I did find someone impersonating me on uh telegram the other week but then again I that's par for the course now and I'm sure in due course AI will be used to try to replicate what, you know, content creators, journalists, broadcasters, authors, reporters will do.

16:56But I think that there is a limit to how much what we can do can be recreated by AI. And I'm not just saying that because I'm desperately hoping to still have a job in five or 10 years time. Yeah, that plays into it. I think it comes back to what you were saying there about the human in touch and and something that's always ran through my career is the fact that you can be across the numbers you can be across the products but fundamentally money is about our feelings it's about our attitudes it's our families it's our culture it's society it's politics it's everything yeah and you have to develop quite a high degree of emotional intelligence to be able to interpret money through all those different lenses at any given time and to try to do it for an audience that are have been told either you know by their immediate family and friends or just by the general culture that this is a boring dry subject and something that they can't possibly get their heads around so you have to already deal with that barrier before you can get through and then get those important messages to people and so AI has got a kind of limited box of tricks to be able to do that and can assimilate and emulate how we do things.

18:11But it's that extra something that advisors and journalists bring to their work in this space that has that cut through and can reach people and help them understand something that would otherwise just overwhelm them. Yeah, good. So there are some useful tools and that idea that advisors perhaps do need to think about how they can meet young people where they are. so I know a lot of advisors they go into workplaces but perhaps you know go to the shop floor go to the hairdressing salons have conversations with young people because a lot of these people they're 18 they're 19 they're 20 they're probably not even geared up for anything even remotely resembling a pension yet but they might be thinking about ISIS or buying a house or wanting to get on the property ladder so these are sort of basic life bits of life guidance that could be given.

18:58Yeah and I do also think that if you can bring young people into your firm obviously that's always going to help. I know what the challenges are, I know it's expensive, I know that there are fears that that younger generation has got high expectations of their work life and that you might not be able to meet them as an employer but I think there are so many hard-working, ambitious, hungry young people that I meet that are just desperate to get on in this world. They're incredibly worried about AI they're incredibly worried about making an honest living um but they are they also do want to help people a lot of them and they do want to do something that's got purpose and I think you know um giving advice to people that will change their lives and change their finances is is the definition of having purpose in your job so I think sticking with those channels of recruiting younger people and nurturing them and being patient with them in the long run will pay off.

19:50And those younger people can be a helpful, you know, front person for your firm. They can get on social media. They can be a bit of a young ambassador for your firm. And they can show that actually this isn't just for older people. It's for younger people too. Yep. And we were all young once. Well, you still are young. Young at heart. Young at heart. Well, I don't know about that as well. Ask me after Christmas if I still feel young at heart. Sure. I'm aware that, you know, we're obviously recording this podcast just before the 2025 budget. And obviously there's loads of speculation, which is just that at the moment, pure speculation about what might happen.

20:27But could we talk more widely about policy in general and how it affects young people, either in their psyche or in their actual purse belts? I think by this point, young people don't really hold out much hope that there'll be anything in a budget for them, because I can't recall that much being announced in previous budgets that has had a tangible impact. There have been policies that have been aimed at younger people, such as the lifetime ISA. I like the lifetime ISA. I do too. I do too. I think it's a flawed product, though, and I think one of the problems is if you bring something like that in, it contributes to people's sense that the parents that be don't really know what they're doing, and they're not really across the detail because they can bring a product like that in, and then property values can go up.

21:13And it ends up not being suitable for a lot of people saving in the south and the southeast. And then you've got the penalties that are involved, which are, one could argue, unnecessarily punitive and that you end up with the worst of both worlds. You know, you're not really incentivizing people to save for the long term, but you're punishing them if they actually do need that money in here and now. So I think, I mean, if you can use the lifetime ISA responsibly, it's helpful. but it's kind of just an example of a slightly gimmicky kind of product that can be used by a certain number of people but is not really a game changer.

21:45Of course. And of course at a wider level, you know, building more homes would be but that's obviously stymied by a lot of the planning regulations that we have, a lot of the red tape. Whether that will be meaningfully addressed in this budget, it remains to be seen. And of course, if you end up having a kind of reassessment of the council tax system, if you end up introducing what is in effect a wealth tax on people who own homes that have a higher value, there is that risk that you just end up clogging up the market because if you don't have to pay that now, if you only have to pay it once you sell the house, people go, well, guess what?

22:20I'm not going to sell the house because there's a very good chance the policy will be reversed anyway by the time I come to sell the house and I won't have to pay it. And it has a knock-on effect right down the ladder and I think we're seeing the consequences of that lack of ambition around housing really play out for younger people now, whereby, yeah, you're having to wait until you're in your early 30s or mid-30s, even if you're saving really hard. You're delaying those important life stages. You're not necessarily starting a family when you'd like to. All these things that really help with the economy and, of course, you know, renovating properties.

22:55Yes. All that stuff, buying furniture, all of that is good for economic growth too. Absolutely. More homes equals more jobs. Exactly. Literally, yeah. Very powerful case there for just having such a massive, radical, you know, reassessment really of how we approach the housing market. But we just haven't had it and I'm not hopeful we'll have it now. Well, I spoke to a property developer who's building beautiful homes in the Greenbelt, really paying attention to the surrounding areas. I mean, they look like they could just come out of a Jane Austen set. It's incredible. You would not believe these are brand new homes.

23:29And his view is that I only want to build homes that I would like to live in. Yes, it's a radical concept. It's a radical concept, you know, rather than these horrible little cookie cutter, squish them in, you know, stack them high, sell them cheap kind of affordable housing. This is affordable housing. When I asked how much they're going for, and you say, oh, you know, sort of 235, 285, 300. I sort of looked at him in sort of horror, like how can you be selling them so cheap? But the fact is you can start doing things if the planning works, if you can start reclassifying some green belt as grey belt.

24:03If you can get rid of the nimbyism, if you can get rid of this idea that, you know, we cannot touch this green land, it must be absolutely sacrosanct. I mean, that was necessary in the 1950s, but we had a much lower population, a much higher population now. Yeah, yeah, and I think we all... We need the infrastructure. I think we all understand that I love animals. I don't want to see animals being killed. I don't want to see bats being killed, newts. Not sure about spiders because I've got arachnophobia, but all the same, apparently there is a jumping spider in Ebbsfleet that has stopped a whole development happening there that would have been incredibly beneficial.

24:37They're quite cute. Are they really? Yeah, they're quite cute little things. Okay, well, maybe I'll give them a second chance. But I've got nothing against jumping spiders. I just want to put that on record. But yeah, it's another example of how... In case there's one listening. Exactly. The jumping spider community will be up in arms. I think, you know, yeah, these are all examples of how those bigger policies could have an impact on younger people's finances. But I guess coming back to your original question, younger people just don't hold out that much hope of there being anything really for them in the budget.

25:07They're just getting on with it and trying their best and getting by. So if you were Iona from accounts, I know the role of a chancellor is a poison chalice. I would never want to be chancellor. No. But if you were chancellor, what would you like to do to help bridge this intergenerational wealth gap if all policy tools were available to you? Hmm. Well, the minute that I start making suggestions, I'm sure people will pick holes and find fault and that it'll be entirely justified. I think obviously housing has to be addressed and that we do have to find a way to strike that balance between having beautiful developments with sufficient infrastructure so that we're not just kind of building these, you know, cookie-cutter villages, sticking them out in the middle of nowhere and, you know, giving them no GP surgeries, no schools, none of the things that really matter.

26:04But we do have to tackle that as a matter of urgency and then that way hopefully we start freeing up more housing for younger people. We've got to try to address that 100K cliff edge. I'm seeing so many young professionals that I know, like they're not working as much as they were because they just see themselves being punished by that marginal tax rate once they get past 100k and we know that that is a real wealth creation opportunity there people who've worked hard in their 30s and 40s having families having homes being ambitious they want to go past that 100k mark but they just don't feel it would be it would be right, you know, giving most of what they earn to the tax office past that point.

26:47And then it has a knock on effect also on childcare and other benefits. Yes, exactly. Exactly. And if we can try to address that around childcare as well, that is a very, very sticky problem. And I don't know what the solution is. I don't know if the answer is more subsidised childcare. I don't know if it's giving people more freedom to be able to stay at home and supporting that particular model. But, you know, we have to start exploring more options and being more ambitious in that regard too. And I think there is something to be said for raising the personal tax free allowance. I mean, I know that there's been a petition recently to get it to 20k.

27:22And I did think that that wow, that's ambitious, ambitious. And you know, I saw an article in the headline was them update on the campaign to get this allowance up to 20k. And I was like, yep. And I bet when I click on the article, it will be that the government said absolutely not and sure enough it said no we're not doing it it just seems too um too much of a of a loss to the treasury at the moment but i think that if we did have a higher tax-free allowance just think how much that would also motivate those who are kind of starting out in their career who are you know really needing to keep every penny that they earn in their back pocket and what they could do with that money um and how it could just really go such a long way for families.

28:05I don't know. Maybe there are lots of problems with what I've just set out there and that it would cost a lot. But these are the things that I see in my work, the things that people are really concerned about that we do have to do something about. No, I think those are very, very sensible. And ultimately, if people feel richer, they spend more, money goes back into the economy. It's a bit of a no-brainer. But Iona, sadly, that is all we have time for. You would get my vote absolutely as Chancellor. You could put me in as your spin doctor I'd be happy to do that. Well you could be the Prime Minister.

28:39Oh no thank you I'd rather be the Alistair Campbell of the of the whole affair you know. Pulling the strings behind the scenes. Pulling the strings behind the scenes and then going off and writing sort of memoirs afterwards. And having a very successful podcast. Exactly. Not as good as this one. Of course not and not as good as yours obviously. But thank you ever so much for coming in it's been an absolute delight to see you. Thank you for having me. Thank you and thank you all for listening. For more news and views stay tuned at ftadvisor.com.