Press Release

Broke Britain, not broken Britain: young adults left most at risk in recession by Government and financial industry

20 October ,2008

A heavily-regulated and outdated financial establishment has left young adults most at risk in any recession, argues a new report released today from the independent think tank Reform and the Chartered Insurance Institute (CII). The report suggests that IPODs - Insecure, Pressurised, Over-taxed and Debt-ridden 18-34 year olds - are the “gilded generation”: uniquely pampered and over-protected, yet increasingly isolated from financial services. Now they face the economic downturn without the tools to cope.

The report, Money’s too tight to mention: will the IPOD generation ever trust financial services?, finds that the “financial establishment” has failed young people. Banks and financial services are out of touch, offering advice and products ill-suited to the way IPODs lead their lives. Government-sponsored regulation has compounded the situation, overprotecting young people into a state of irresponsibility and pushing up the costs of financial advice.

The report argues that unless financial services can engage the younger generation, and government dramatically reduce regulation, the UK is facing the potential post-retirement poverty of an entire generation.

Lucy Parsons, Senior Economics Researcher at Reform and report author, said: “We are living in “broke Britain”, not broken Britain, and my generation is suffering. We are potentially more capable of managing our money than previous generations, but we have been let down by the financial establishment and government.”

Trevor Matthews, CII President, said: “What is striking in this report is that IPODs possess the highest potential for appreciating the good value of advice and yet are not benefiting from it. Trust and the ability to explain complex concepts are the cornerstones of their service expectation. As the professional body for insurance and financial services practitioners, the CII Group including the Personal Finance Society (PFS) believes that restoring the IPOD generation’s trust and confidence is paramount. We are keen to lead that debate.”

The report’s key findings are:

· Over half of IPODs have debts excluding mortgages of up to £10,000 and a fifth has debts of over £10,000. The mean debt among 18-34 year olds is close to £6,000.

· Nearly a third of IPODs have no savings. 60 per cent have either no savings or less than £1,000.

· A third of IPODs think that financial advisers are out of touch with younger generations. Half rely on friends and family as their main source of financial advice. 60 per cent of IPODs cite trust as the key driver of this decision; clarity of explanation is another important factor.

· A third of IPODs say they do not understand financial products enough, and only half feel confident in making financial decisions.

· Half of IPODs are concerned they are not saving enough; 60 per cent would like to be saving more and borrowing less.

For more information contact Alex Thompson (CII) on 020 7417 4430 or Lucy Parsons (Reform) on 020 7799 6699.

Notes for editors

1. The Chartered Insurance Institute is the world’s leading professional organisation for insurance and financial services. It maintains the professional, ethical and technical standards of the industry.

Reform is an independent, non-party think tank whose mission is to set out a better way to deliver public services and economic prosperity. We believe that by liberalising the public sector, breaking monopoly and extending choice, high quality services can be made available for everyone.

2. Money’s too tight to mention: will the IPOD generation ever trust financial services? is will be available from 00.01 Tuesday 21 October on http://www.cii.co.uk/research and http://www.reform.co.uk/documents/Final%20Report.pdf

3. The report’s authors are:

Nick Bosanquet, Professor of Health Policy at Imperial College London and Consultant Director of Reform
Andrew Haldenby, Director, Reform
Lucy Parsons, Senior Economics Researcher, Reform
Elizabeth Truss, Deputy Director, Reform
Laurence Baxter, Head of Policy and Research, Chartered Insurance Institute

4. The report was launched at a CII-Reform breakfast seminar on Monday 20 October with Julia Goldsworthy MP, Liberal Democrat Communities and Local Government Spokesperson, Andrew Haldenby, Director of Reform; and Trevor Matthews, President of the CII. Over 60 people from financial services industry, government, consumer groups and youth charities attended.

5. Poll figures are from Populus research commissioned by the CII and Reform for this paper.