Now the Brexit result has been declared, we now have to deal with the consequences, which in the short term has been a devaluation of the Pound and a fall in the FTSE. Although the noise in the short term will make investments look riskier, the longer term prospects are probably not changed a great deal. Capitalism uses a process of creative destruction to move from one norm to the next, so a better question is who is likely to get damaged in the process.
Looking at the way people have voted in different age groups, educational levels, and social class suggest that we have a divide on generational, educational, and economic class lines. The best explanation and nicest graphics I could find are here:
We have an aging population, so it is dominated by the older age groups, who in the opinion of many millennials appear to have taken all of the advantages they were given for granted and now poisoned the fiscal environment for those who follow.
Take freedom of movement; in about 2 years’ time, free access to 27 countries for work or business will be denied for the newly economically active. The UK has enjoyed a lower than average youth unemployment level than the EU as a whole, but recent actions suggest we will have a local recession and no easy path to get on their bikes and find work outside the UK.
Take education; most of the educated older and better’s will have had the benefit of higher education with grant aid and no tuition fees. This has been comprehensively smashed, with degree courses in the USA, Holland, Belgium and Denmark suggested as a more economical alternative to a UK university. Access to the USA depends on the ability to pay up front or getting a scholarship, within the EU, free movement and residence, levelled the playing field.
Consider housing; the huge cost of house purchase and the rising cost of rental mean that getting somewhere to live routinely costs 30% of take home pay and often up to 50%, leaving very little for saving, pensions or fun. Guess who owns most of the housing and prevents new homes being built?
Take the environment; as a group the millennials are much more concerned with protecting the environment and sustainable living. Decisions about fracking, genetically modified crops and the EU Habitats Directive will move from a relatively stable position to a likely pawn in a trade bargaining round with the Anglosphere, (Monsanto would love to get GM crops into the UK and the EU has blocked it to date).
Take pensions; final salary schemes are all but dead in the private sector and are being undermined in the public sector. Workplace pensions schemes are a start, but are wholly inadequate to support half pay at State Retirement Age. The millennials do not have the cushion of property or the expectation of a job for life, so things look rather bleak. The pension “triple lock”, giving increases to the state pension of CPI, the rate on increase of earnings in general or 2.5% is a cost the millennials will have to pay, not the benefiting baby boomers. The current WASPI arguments, (Women Against State Pension Inequality), don’t make this any easier, with people who did not make the required national insurance contributions demanding the right to be subsidised by the population as a whole.
Take public debt; someone, sometime will need to pay it down. Like private debt, you are accelerating your pleasures and saving the pain for later. The millennials will have to address this problem as the baby boomers have ducked it. Worse still, the North Sea Oil Boom was blown on propping up old strategic industries and delaying the inevitable. The Norwegians have a sovereign wealth fund, we don’t!
As parents of millennials and IFAs, we are hostages to fortune; trying to engineer a better future for our children is likely to have a direct impact on our present affluence. Sometimes, blood is thicker than water and doing “the right thing” is more important than a little local difficulty.
As parents, the priorities seem to be:
- Get your millennial into a savings habit. This will be essential to get by in later years.
- Get your millennial to think critically; just because someone says something does not mean it is true. Give them the tools to research an issue and build an argument.
- Provide active help for educational costs; a good educational grounding could take them anywhere in the world.
- Co-finance housing, if you can afford it. Gift them a deposit or act a guarantor.
- Try and get grandparents to gift cash into pensions or house deposits. Gifting money while still alive is likely to be more tax efficient than letting inheritance take its course.
- As millennials will change job and career multiple times, make sure they update their skills and keep themselves marketable. No jobs for life, so keep up-skilled and flexible.
- Try and get them engaged into the political process. Decisions are made on their behalf by remote, faceless and potentially self-serving functionaries. Remember that both action and inaction has consequences.
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The information contained is for guidance only and does not constitute financial advice. It is based on our understanding of legislation, whether proposed or in force, and market practice at the time of writing. Levels, bases and reliefs from taxation may be subject to change. Accordingly no responsibility can be assumed by Martin-Redman Partners its officers or employees, for any loss in connection with the content hereof and any such action or inaction.