Marketing pensions to the under 35s

This report examines young people's attitudes to saving for their retirement and what can be done to encourage this. Using primary consumer research from Mori and Datamonitor's proprietary Consumer Mega Trends model, this report identifies the current targeting gaps within this market.

Report Highlights
Young people should be saving for their own retirement as demographic pressures on government funding build. Despite this, a large portion of the younger population are saving too little or nothing at all for retirement as a perturbing trend emerges that under 35s are getting into more debt and are worrying less about their future. The industry is poor at customer targeting and innovative marketing. Most financial products are a “grudge purchase” & it is hard for customers to feel any sort of emotive link to their products. Plus, financial services suffers from negative publicity, mainly because people do not praise when services work but do criticize loudly when they fail.
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Overview 1
Catalyst 1
Summary 1
Executive Summary 2
The under 35s need to save for their future, however they are embracing debt 2
The strain on the first pillar will increase over the next 20 years 2
Most young people do not have a pension 2
The financial services industry is neglecting young customers 3
Advisors admit they are not actively targeting young clients however believe they are important to the future 3
Marketing within a mega trend framework can draw out new ideas 4
Datamonitor's mega trend framework consists of 10 key consumer trends 4
The four complexity trends 4
The six behavioral trends 4
5
Table of figures 6
Table of tables 7
Young People and their relationship with savings 8
The under 35s need to save for their future however they are embracing debt 8
The first pillar of pensions is under immense pressure 8
An ageing workforce will put pressure on young people to support retirees 8
The strain on the first pillar will increase over the next 20 years 9
Young people are not saving for the future, assuming that they will be looked after by the already buckling state system 10
Not only are young people not saving but their debt is increasing, leading to a spiral of low savings and rocketing credit 10
Most young people do not have a pension 11
Affordability is preventing pension saving 12
Young people need to start thinking early in their careers about building retirement savings 13
Those young people who are saving for their retirement still aren't saving enough 14
Responsibility for shifting the attitudes of young people lies with the government and the industry 15
Young people need to be financially educated so that they do not rely on credit 15
Generally, the under 35s lack adequate financial education and skills 16
Educational charities would like to see personal finance as a compulsory subject taught in schools 16
A number of online websites have been launched to help educate young people about their finances 17
Government reforms will help individuals save for their retirement 21
It is proposed that all employers will be required to pay personal pension contributions to employees 21
The state pension age is set to increase for men and women from 65 to 68 by 2046 22
Providers are not targeting the long-term needs of the under 35s 23
The financial services industry is missing the opportunity to 'tap' into the young mass affluent market 23
Advisors admit they are not actively targeting young clients however believe they are important to the future 23
Banks are targeting under 35s in other market areas but are failing to offer long-term products 24
NatWest offers young clients face-to-face assistance when managing their finances 24
Lloyds TSB encourages individuals to start saving small in an innovative way 26
Halifax looked to radio marketing for the first time in 2007 to attract young customers to its banking services 28
Targeted Marketing of Pensions to Under 35s 30
The financial services industry is neglecting young customers 30
Marketing within a mega trend framework can draw out new ideas 30
Datamonitor's mega trend framework consists of ten key consumer trends 30
The four complexity trends 30
The six behavioral trends 31
Young people's priorities are convenience and a feeling of connection 31
Connectivity 32
Connecting to the world and having a sense of belonging appeals to young people 32
Convenience 33
Young people are increasingly seeking a purchasing experience that is efficient so they have more leisure time 33
Health and wellness 34
Pensions can help young people look after their financial health of the future 34
Comfort 34
Under 35s are typically more risk seeking than wanting to feel comfortable 34
Sensory 35
Under 35s are focused on maximizing their current consumption pleasure 35
Individualism 36
Collective investments such as pensions are unlikely to be marketed as personalized consumer products 36
Life stage complexity 37
There is an opportunity to 'tap' into the under 35s market before they start a family and buy a home 37
Income complexity 38
Under 35s want to consume premium items and get value for money at the same time 38
Gender complexity 38
Women are increasingly looking to be financially independent 38
Age Complexity 39
Pensions are too often associated with the idea that it is a product only for middle-aged people 39
APPENDIX 40
Definitions 44
Personal Pensions 44
Methodology 44
Ask the analyst 44
Datamonitor consulting 44
Further reading 44
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Table 1: Changes in population segments between 1981 and 2006 40
Table 2: Mega trend rankings of current market and potential market 40
Table 3: 82% of young people have never heard of SIPPs 41
Table 4: 82% of young people have never heard of SIPPs 41
Table 5: Only around 10% of 18-29 yr olds are saving the amount required for a £15k per year income in retirement 42
Table 6: 79% of 18-29yr olds have no pension 42
Table 7: 43% of young say they have no pension because they lack any spare money 43
Figure 1: 79% of 18-29 year olds have no pension 3
Figure 2: Pressure on the working age population is increasing as more people begin to retire 9
Figure 3: 79% of 18-29 year olds have no pension 12
Figure 4: 43% of the young say they have no pension because they lack any spare money 13
Figure 5: A significant saving per month can be made by starting to save earlier for retirement 14
Figure 6: Only around 10% of 18-29 year olds are saving the amount required for a £15k per year income in retirement 15
Figure 7: Moneymadeclear is a website launched by the FSA to help simplify financial products and services 18
Figure 8: The What Money Means program was launched by pfeg and HSBC to improve personal finance education in primary schools 19
Figure 9: Choosingandusing provides online users with general advice on credit cards 20
Figure 10: By 2012 it is proposed that employees will have a minimum of 8% of their salary paid into a personal pension scheme 22
Figure 11: NatWest encourages graduates with business ideas to work with its business banking unit to develop their ideas 25
Figure 12: NatWest markets lending products at graduates rather than long-term saving and investment products 26
Figure 13: Lloyds TSB encourages young people to think about their monthly spending habits 28
Figure 14: Connectivity and convenience are considered the most marketable ways to promote pensions to under 35s 32
Figure 15: 82% of young people have never heard of SIPPs 36
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