The ageing society is not just an issue for “older people” – it affects all age cohorts, in different ways.
Long-term savings providers and insurers are at the coalface of the ageing society, providing many of the products and services people rely on for their financial security as they age, and are adapting them to adjust to this immense societal shift.
Auto-enrolment into workplace pensions is of course the Government’s flagship reform to ensure people have a long-term savings vehicle that will provide a retirement income, and long-term savings providers have enrolled millions of savers. But the DWP’s own scenario analysis shows that even with auto-enrolment complete, 11.9 million people will still be undersaving,
At the same time, the Government’s Freedom and Choice reforms have given unprecedented flexibility at the point of retirement. After successfully implementing the reforms, providers have now started to adapt their product and service offerings, for example through combining guaranteed income with flexibility, and branching out into “robo-advice”.
However, the existing framework for guidance and advice has arguably not kept pace with these major reforms. The Financial Advice Market Review provides a golden opportunity to re-think how to enable providers to give policyholders more support than is currently possible without overstepping the advice boundary. Providers are already signposting to Pension Wise to help customers make the most of their new pension choices. But we would like to see all public bodies work with industry to signpost people towards advice and guidance at critical junctures in their life.
In particular, Government should signpost the Pensions Advisory Service at age 50 for all citizens for a conversation about their pre-retirement finances, similar to the NHS’ “mid-life MOT” of people’s health.
Care funding should be part of this conversation as longer lifespans can also mean care costs, be they in the home or in a residential setting and more flexible retirement income products can help manage care expenses in later life. But we must work together with Government to extend this concept to give people a comprehensive view of all their assets in one place – with a “pension dashboard” showing consumers their overall preparation for retirement, including the State Pension.
More broadly, the industry is also adjusting to its ageing customers. Whilst many older people are experienced and knowledgeable at dealing with financial services products, some older people are vulnerable and less able to make the most of a competitive market. To address this, the ABI and BIBA published a Vulnerable Customers Code in January 2016.
The examples above show that progress is being made in adjusting to an ageing society. However, efforts are piecemeal and not necessarily co-ordinated and further far-reaching policy changes, not least on pension tax relief, are on the horizon. This is too important an issue to address one policy at a time - we would like to see a broader strategy across Government, regulators, industry and political parties that truly re-imagines the future of our ageing society.
This blog first appeared as an article in the FCA’s Discussion Paper on ‘Ageing population and financial services’. We will be discussing the ageing society amongst other key issues at the ABI’s Transforming Long Term Savings Conference on 19th April.
Yvonne Braun is Director of Policy, Long-Term Savings and Protection at the ABI