There are big societal issues to be solved, particularly looming retirement poverty and there is a lack of solutions and planning. Sadly, people are living longer but iller lives rather than longer healthy lives meaning that more people need longer later life care and there is pressure nationally. As professionals in the FS industry, our collective role is to try to tackle these problems.
There are big societal issues to be solved, particularly looming retirement poverty and there is a lack of solutions and planning. Sadly, people are living longer but iller lives rather than longer healthy lives meaning that more people need longer later life care and there is pressure nationally. As professionals in the FS industry, our collective role is to try to tackle these problems.
Gender inequality plays a role in the problems - there is a higher chance of female poverty than male poverty in retirement and so with females expected to live longer, there lies a problem. This is because the average female retirement salary is £13000 as opposed to £45000 for men.
It is, however, encouraging that more people are investing in pension schemes now but unfortunately they are not investing enough. The amount they should be investing into their retirement was compared to saving for a second mortgage rather than the reality which can be people saving £50 per month. Also, the general public (adults and children) are not educated enough in financial planning. It doesn’t help that high street advice has been taken off the market. The younger generation is confused e.g. no idea what auto-enrolment is. Often Gen X is confused too. It is up to banks and building societies and government and regulating bodies to educate generation Z. Advice is key and we should use education and digital hubs to aid learning and awareness and in doing so keep the regulator happy. There may be more problems if your in-house staff aren’t tech savvy – they need to be before they can educate customers. And what does being digitally savvy actually mean? Could we give education by making financial planning part of the mandatory syllabus? Education should start in school and then be maintained.
We should use the technological advances of the internet and communication platforms to educate the vulnerable and the good news is that the London Mayor has discussed investing heavily into digital comms and internet speed. Having said that, the elderly not being online is a blocker.
We need to change thinking and need more products and advice as we, in the industry, recognise that there is a major problem, but the public don’t. That is because they can’t visualise the problem because it hasn’t happened in their lives yet.
Facts:
- £36 billion withdrawn since pension freedoms
- More people spending on things like holidays and cars
- There are a 1/3 more pensioners living in poverty in 2019 compared to 2012
- ½ the people living in retirement poverty own their own home
- only £500 per month is the difference between living in retirement poverty and living comfortably
Equity release is not necessarily always the answer – but what is? Care costs deducted from equity can cause problems. Is misspelling also a problem? The elderly is exhausting their children’s and grandchildren’s inheritance on retirement care. C suite needs to innovate and care about doing right by the customer. Perhaps we need to start changing mentality internally in our own organisations?
There are 2.2 million people living in retirement today sitting on equity but yet considered as only subsistence living. So people need to think more about the way they save for retirement. We can start challenging psychology i.e. no guilt in equity release or renting rather than owning a property. There is a stigma with the idea that the net sum at the end of life is zero – people feel a responsibility to make sure this is not the case. In this way, the UK is different to Europe. Families have family mortgages and many more people rent rather than buy property and are content to. Owning a house earns different kudos compared to here in the UK and we can learn from this. France educates more too.
We should consider gamification as a platform to educate. Simple points, prizes and basics. Not just gaming though, we need multiple platforms. We need to make people trust the FS industry. What is the social responsibility of the banks and retail brands? At least we have already recognised that we have a responsibility even if we haven’t figured out all the answers. We must talk openly about how we might make positive change.
There are inconsistencies in the industry and part of the problem is applying a rational dialogue to an emotive issue. We need to change thinking and need more products and advice. Banks already flag vulnerable customers. Should age be considered a vulnerability? We should think about resilience. If we want people to share data, we need to be more thoughtful. Ring fencing is not helping and of course GDPR is not helping the sharing of data either. Perhaps the regulator needs to change the agenda to help Financial Services help the customer and execute good practice.
Are we prepared to serve those who need us most even though there’s a low margin and there is a pressure from regulators to balance cost sheets? Advice is vital and people will believe in our brand and show loyalty if we do the right thing, give access to the vulnerable and understand our customers.
Another challenge for retail financial services is that those people who are loyal to their existing bank or building society tend to stay there – so responsible brands need to get the customers in from an early age.
The Banks and brands in retail financial services need to collaborate rather than all offering different products and over confusing people leading to lack of investment. Should they all become product manufacturers? The overall feeling in the room was that we are not sure yet! We need to see what the market place does first. Perhaps we can condone collaboration above our own personal vested interests.
The sharing of data means giving away data to competitors but consider the greater good. If we are going to talk about social change and impact, we have to actually do something. Otherwise we don’t make any tangible change and become hypocritical. Someone needs to take the lead on getting CEO decision makers together with experts and talk about how we can support positive change. We could do with senior regulators and trade bodies in the sessions too. We discussed a new event with this agenda – an opportunity to produce a whitepaper and give it to regulators to help tackle this problem. We need to think about the good of the consumer. This new event will not be sales focused, more of a think tank where we can manifest our thoughts into practical actions which we can be held accountable to. That includes retail banks and brands the wider FS industry, government, regulation, schooling and the media.
Most people would like to own their own home and most people want to stop working. So, let’s look at realistic planning for our customers and our most vulnerable ones to achieve this. The bulk of the customers that need advice are those who cannot afford it and will likely end up in retirement poverty - we should not be charging our vulnerable clients more. Advice should also include planning for the unknown.
UK regulation is so complex. Lots of delegates around the table agreed that they have a social responsibility to look out for customer, educate and not encourage scaremongering through the media. Banks and building societies need to inspire trust. The roundtable inspired a couple of ideas in analogies – there should be an ‘NHS’ for finance. The public should be able to get a financial ‘MOT’.
People won’t come for advice if they don’t think they need it – another reason to educate people. So, we need to make people realise they can control their retirement if they plan early. Bosses and C suite must not limit innovation. We might be way off a solution right now but more conversation with the UK population is necessary. Let’s make it a priority. Let’s create a platform with the regulator in the room and potentially other audiences. One delegate admitted they are too product focused so let’s consider social impact vs. profitability. Let’s not call it ‘retirement planning’, but ‘financial planning for your retirement’ as this implies the need to do something now! One delegate thinks the government won’t do anything as it’s a ‘vote killer’ so we need a central voice. Let’s make starting to tackle this problem a permanent topic on the agenda. Make sure we are moving things forward. Let’s collectively commit to research as this is not a single organisation problem –this is an issue everyone in retail FS should be tackling and innovation should be considered an ethical point.
Expert: Tony Crane, Bank of Ireland
Facilitator: Tim Waterlow, The Retirement Mortgage Service
