Another factor to consider is the extent to which younger generations lack cover. Statistics provided by Scottish Widows show that only 7 per cent of under 35-year-olds held a critical illness policy in 2019. The provider’s most recent claims statistics over 2021 show that 44 per cent of CI claims are paid out to customers between the ages of 31 and 50.
Advisers should consider suggesting their clients pay for their children’s protection needs, says Tony Mudd, divisional director for development and technical consultancy at St James’s Place.
In Mudd’s opinion, this approach is applicable to “life cover because they have a dependent of their own, critical illness because they have a mortgage, or income protection because they are renting”.
He explains: “The point is, this generation will all too often not appreciate the need for protection and those that do will rarely be able to afford it or more likely prioritise the expense. Clients with capital on the other hand can afford it but don’t have to give away their capital – instead they can simply use a small element of their income they derive from it.”
Mudd adds a more conventional use of life policies within the sphere of the intergenerational planning could include estate creation – the concept of establishing a whole-of-life policy in trust to provide a legacy or create an estate for their children or grandchildren. The next article in this series covers these issues in more detail.
Ruth Gillbe is a freelance journalist
