This question was the starting point of Age UK’s first Financial Services Commission summit event on 6th December. It arose from forthcoming Age UK research which suggests that although those coming up to retirement are often seen as a wealthy and resilient generation, all but the most affluent face considerable challenges, and there is a widely prevalent feeling of uncertainty which deters saving.
The Commission – jointly chaired by Tom Wright, CEO of Age UK and Dr Alexander Scott CEO of the Chartered Insurance Institute – was set up to examine how to improve financial resilience in later life.
At the event (hosted by BlackRock, the investment management firm) Tom challenged senior figures from the financial services industry, consumer and regulatory organisations to give their recipe for improving financial resilience among the group approaching retirement. The debate ranged between those who feel we need to build trust in the financial services industry and those who pointed to supply-side failures. So far, so unsurprising. But there was a new mood of optimism and – dare I say it – realism.
Optimism about the encouraging start to automatic enrolment into workplace pensions, and the experience with increasing pension saving in Australia.
Realism about the need to go with the grain of people’s experience, particularly at a time when people are struggling financially.
Attendees also pointed that we could learn much from what happens in healthcare. It is at significant lifestages – sometimes difficult ones – that people are most open to change behaviour, and messages should be non-judgemental, recognise the complexity of people’s lives and deal with short-term needs. However, as people age their finances become more complicated, and they need to manage existing savings and understand how much they can safely spend. The current model of financial advice is designed for the wealthy, not the mass market; the advice market needs to be more efficient and better at joining up free advice services with regulated financial advice, and at linking up financial planning with health and housing issues.
A recurrent theme was the need for honesty from the industry regarding forecasts of savings and earnings – but the same applies to Government regarding, for example, the limitations to the proposed cap on care fees.
Ideas for new products to help people to manage the risks they face in later life included disability-related annuities; combining pension and ISA saving; or the US model of part of your pension contributions going to buy a deferred annuity to guarantee a minimum retirement income. However, existing products need to be improved too, for example to work better for people with health problems. Could mortgages and equity release providers work together to develop shared ownership products for pensioners, or innovative products to take account of intergenerational needs? And could we learn lessons from the National Lottery and Premium bonds in developing future savings products?
So what was the answer to our question, ‘is it too late to save’? Well there was no single solution, but as one attendee said, even modest saving could provide’ the icing on the cup cake’ in retirement, such as an occasional visit to the cinema. There is a risk that by concentrating on complex solutions we could miss the two or three simple steps that could make a big difference to later life.
This event has given the Commission a big agenda to tackle, ranging from understanding the dynamics of planning for later life and encouraging savings, addressing the industry’s reputational problems and developing more innovative and flexible financial products, and providing information and advice. Our next summit event takes place in February and will focus on developing financial resilience among people who are just retiring or in early retirement. In the meantime you can keep up to date with developments on the Age UK website. Any thoughts would be welcome.