Financial health-checks for individuals before retirement will improve access to advice and promote greater financial resilience in later life, but it must be balanced by providing initiatives to promote financial education among all ages, according to GlobalData Financial Services.
The concept of a ‘mid-life MOT’ was introduced by the Crindland Review in 2017. The idea is that individuals will have a ‘financial health-check’ with an independent financial advisor in the run-up to retirement age.
The government has been receptive to the idea and seeks to offer the service to those in their forties so they are financially prepared for the last decades of work. Mid-life is seen as a pivotal moment
Aviva has recently piloted a scheme in which 94 employees took part in a range of classes and discussions about wealth, work, and wellbeing with the aim of preparing them for the rest of their working lives.
The feedback highlighted that employees are confused about managing their finances and so support is beneficial.
Longer working lives
There is acceptance that working lives are getting longer but individuals want advice on how they can work later into life, for instance by going part-time. The government intends to use Aviva’s pilot to help inform its scheme.
It seems likely that the final service will be rolled out through employers. The government is increasingly using employers as a channel to engage with individuals, although this does call into question how the self-employed will access the service.
Mid-life is seen as a pivotal moment in determining an individual’s financial situation as they prepare for retirement. A mid-life MOT will help to improve access to advice services and therefore improve individuals’ financial strategies for retirement.
However, the initiative also needs to be supported by promoting financial education and saving among the young, By 40 an individual may already have missed out on two decades of saving time.
Auto-enrolment has been a step forward in this whereby more employees are now contributing into a workplace pension
which will promote saving from a younger age. However, individuals have not actively had to engage with this legislation. Financial services should be doing more to engage with younger generations. This can start as soon as children are given their own pocket money to manage.
Some schools are starting to run their own ‘banks’ where the rewards children get for performing well can be used as currency to purchase items from the school bank’s shop such as toys or bookmarks.
This teaches younger students to save and the mentality of earning and rewards, while older students can work in the bank for more responsibility.
L&G Savers Badge
Legal & General has additionally launched a new “Savers badge” for Girlguiding UK. It has been created to promote financial literacy among teenagers and young women, and will help promote the understanding of cash management, weekly spending, and saving.
Going to university is also a prime time to target the young. For the first time, young adults move away from home and are in charge of managing their own time and money.
Simply put, financial education will be beneficial not just for those in mid-life but for all age ranges.
For more insight and data, visit the GlobalData Report Store (https://www.globaldata.com/store/). Verdict is part of GlobalData Plc.