Articles - Serving an ageing population

Final salary scheme actuaries are well-versed in the impact of the UK’s ageing population and have adjusted mortality assumptions accordingly. But the impact on financial services in general, and pensions in particular, does not stop there as increasing numbers of people enter longer and longer periods of retirement with defined contribution (DC) plans.

 By Fiona Tait, Technical Director, Intelligent Pensions
 The impact of ageing is a theme that the FCA has been keen to explore, and last week they published Occasional Paper 31 – Ageing Population and Financial Services. As well as confirming, thankfully, that I am not yet defined as “old” (although it’s a close run thing), the paper makes it clear that financial services will have to adapt if we want to serve this growing – and relatively wealthy - sector of society.

 This is not about patronising them, but about recognising that different clients groups have different needs and adapting our services to meet as many as possible.

 Engaging with older consumers
 The paper defines older consumers as aged 55 and above, largely because this is the age at which people can officially become “pensioners”. It also identifies a subset termed the “older old” - those over age 75 - thus highlighting the fact that older consumers are no longer a single group but a much more diverse audience.

 This diversity makes it difficult to define characteristics which apply to the group as a whole but there are some general behaviours which tend to apply as people age:
 • A preference for more familiar products and ways of working
 • A need for more time and support when making key decisions
 • Dislike or difficulty in dealing with new information and continual change

 In the context of financial services this means mature consumers are less likely to look for new products and services and may put off or resist making the difficult decisions which can face them in retirement.

 The paper also suggests there is a lack of products which are designed to meet their specific needs, although I am inclined to characterise this more as a lack of insight into how to use existing products more effectively.

 Decreasing capability
 Of course ageing consumers are also more likely to face both physical and cognitive decline. A fair amount of attention has been given to the rise of Alzheimer’s and dementia, but it need not be as severe as that to impact their ability to access financial services.

 More basic conditions such as poor eyesight can create a barrier by making it hard to read paperwork, particularly where it is complicated and the language is unfamiliar. Poor hearing can affect understanding during face to face or telephone meetings, and slowing mental processes can mean decisions are rushed and not properly thought through. A prolonged or severe physical illness can cause stress and also lead to poor decision-making.

 Financial firms can address these issues firstly by being aware of them and adapting their services and communications, for example by greater use of graphics and larger print for those with visual impairment.

 Access to advice
 Many consumers, not just the ones who are rich in birthdays, find it hard to find financial advice and it is even more difficult for people who do not use the internet. The FCA paper found that internet use declines markedly after age 55 and just under half (49%) of people aged between 75 and 84 have never used it. Technology is improving advice processes but it does not necessarily improve relationships.

 As a profession, we need to make it much easier for clients to deal with us. This means using a variety of marketing approaches to appeal to different audiences, otherwise we face the risk that they will continue to be targeted by unregulated advisers and, potentially, fall victim to scammers.

 For the more mature client personal contact, ideally face to face, is likely to be effective and it is important also that they are given sufficient time and support to make a considered decisions. It is not surprising that sending out complicated paperwork with deadlines for completion does not inspire people to shop around.

 The real problem
 All of these issues need to be dealt with if we are to engage with golden-age clients and circumvent barriers between the financial service profession and society’s true goal for this group of individuals – ensuring that they don’t run out of money in retirement. Just as raising saving levels is the key challenge for clients in accumulation, in decumulation it is sustainability. And we can’t begin to address if it if we can’t bring the consumers with us.

 I am sure that many of the services being considered for an ageing market will be of considerable benefit to other consumers as well as the “old”. I may not be 55 but I appreciate a personal service.

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