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Lost and found

It doesn’t have to be all doom if we get radical financial reforms

UK unemployment levels were recently reported to have fallen but the number of 20-somethings out of work actually appears to be on the rise, which is having a significant impact on the economy. People in this age group are not fully contributing to the National Insurance system and neither are they likely to benefit from it in the longer term.

Graduates with mounting student loans who are unable to find work in the current climate will be debt-laden and reliant on their parents for longer. In the words of Dad’s Army’s Private Fraser: “We are all doomed.” The result could be a lost decade but particularly for 20-somethings unable to plan financially.

The lost decade is usually used to describe Japan’s economic meltdown in the 1990s. Japan is similar to the UK in that it is geographically small but historically economically mighty. It has an ageing population but not enough workers to support the fragile financial infrastructure and while unemployment is rising, there remains a penchant for a quality lifestyle.

The main difference between Japan and the UK is that the former is traditionally a nation of savers and Japan’s credit crunch equivalent did not have a heavy impact on the average family in terms of affordable living. However, liquidity created by investors funded easy credit and fuelled a ballooning housing and stockmarket economy which crashed spectacularly. Sound familiar?

The good news is that the UK and US governments reacted quickly to their financial crises by slashing interest rates and introducing quantitative easing. In the 1990s, Japan dallied and endured many years of pain. With any luck, we will not suffer the same fate.

But what of our own lost decades? Our 20-somethings will need financial advice that is more holistic and less product-driven. We have to try to find a way to make that affordable through technology. Many 40-somethings (women in particular) were not well educated on the increasing need for retirement planning and generally fell into pension provision by chance or through employer schemes. Those in their 60s are concerned by the expensive prospect of longer life expectancy.

I am not a complete convert or graduate of any one institute but I can see a need for a bias towards lifestyle and cashflow planning. Products are a means to an end. What we will need from an innovative Government is radical reform that considers more flexible multi-generation pension arrangements and care initiatives. Then we may not be doomed after all.

Fiona Sharp is a senior adviser at Almary Green

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