Financial Services Marketing To The Retired And Elderly Market Assessment 2007

Transcription

1 Brochure More information from Financial Services Marketing To The Retired And Elderly Market Assessment 2007 Description: The majority of wealthy Britons are pensioners: more than two-thirds of individuals worth more than 1m are aged 55 and over. In addition, pensioner couples are more likely than any other family type to have savings in excess of 20,000. The number of people in the UK population aged 60 and over is forecast to rise by 17.7% between 2006 and The gender gap is expected to be narrower in 2016 than in 2006, reflecting improved medical treatments that are raising the life expectancy of men towards that of women. More people aged between 60 and 80 are fit enough to be able to work on a full- or part-time basis, and they often need to do so in order to supplement their pensions. Between the ages of 80 and 100, the elderly are more likely to need long-term care, and the costs of this make significant demands on those who have saved during their working lives. Those with few assets rely on state welfare benefits. In 2006, retirement incomes were relatively comfortable, as the Pension Credit system supports those who have only, or little more than, the basic state pension. However, the system discourages people from saving more than a few thousand pounds, as it is means tested. The benefits system means that people are better off either with no or meagre savings, or with substantial pensions and savings that can yield enough income to live on. People in work now face lower incomes in retirement than current pensioners. Employers are withdrawing from defined-benefit pensions and young people face large debts for higher education. Prospects for real growth in gross domestic product (GDP) over the long term are weak as a result of higher energy and raw material costs, and supply constrictions. This will restrict incomes and make it difficult for individuals to save enough to keep them in old age. Pension annuities and income drawdown are not a growth sector, and annuity rates have plunged since Canada Life, Legal & General, Norwich Union, Prudential and Scottish Equitable offered many of the highest annuity rates in Enhanced or impaired life annuities give extra income to people with untreatable or terminal medical conditions. Specialist products for middle-aged and elderly customers include equity release, over-50s life insurance and medical insurance. Poor pension provision and a high rate of home ownership underpin the market for equity release. Norwich Union, Prudential, Northern Rock and the financial adviser Key Retirement Solutions are among the leading protagonists for equity release. The equity-release market has not grown as fast as some analysts predicted: providers are cautious in the face of property values that have risen much faster than incomes. The guarantees of no negative equity that give borrowers confidence in the product could be extremely expensive if property prices fell in real terms by the time they were sold. One in five of the over-85s has long-term care, and equity release is one way of funding the cost. Fewer than 0.1% of the adult population have long-term care insurance and the market has not expanded since BUPA has exited the market, leaving just a handful of providers. AXA, Saga, Standard Life and the financial adviser network Origen (part of the Dutch banking group AEGON) are the principal promoters of medical insurance to elderly customers. The trend in medical insurance for older customers is to limit coverage so that premiums are affordable for a wider group than the most affluent pensioners. The conditions covered are those that cause significant distress to elderly people when they are forced to wait months for NHS treatment. According to this research, 81.6% of consumers think that the basic state pension is too low. In addition, more than half (58.7%) believe that the income-tax rate for high earners should be raised in order to pay for a better state pension, which is a significant increase on the percentage recorded in % of respondents to the survey accepted that, in the future, people will need to work into their 70s if they are to avoid poverty in retirement and a further 46.7% said that they are more preoccupied with repaying a mortgage and/or debts than with trying to save for the future. In addition, 41.2% of consumers said that children should no longer expect to receive an inheritance from their parents, while 76.2% agreed that inheritance tax should be abolished.

2 The Government White Paper Security in Retirement: towards a new pensions system proposes a national pension saving scheme with automatic enrolment. The number of qualifying contribution years for the state pension would be reduced, although it has already been decided that the minimum state pension age for men and women will rise in stages to 68 by In the years before official retirement, people are often what Saga Group calls `supercarers', looking after parents and grandchildren, and sometimes their own children too, at a great cost to their health and finances. When women can no longer draw a state pension at 60, they will find supercaring responsibilities even more daunting. The multigeneration household is due for a return, in order to share bills, and income-earning and caring responsibilities. Living in a multigenerational household would be a way for pensioners who do not qualify for Pension Credit to avoid council tax, which has risen three times faster than pensioners' incomes. The post-war generation began to reach 60 in The almost 13 million people aged 60 and over in 2006, rising to a forecast 14.2 million in 2011, will exert great influence in political elections. In the long term, however, not even a powerful pensioner lobby can win resources that the state cannot afford. Above survival level, pensioners will have to fund themselves in a variety of ways and means: the `Portfolio Pensioner' is set to become mainstream. Contents: 1. Introduction OVERVIEW Methodology Problems in the Research Process DEFINITION 2. Strategic Overview MARKET DYNAMICS Rising Number of Over-60s Table 1: Number of People Aged 60 and Over in the UK by Age (000), 1976, 1986, 1996 and 2004 Figure 1: Number of People Aged 60 and Over in the UK by Age (000), 1976, 1986, 1996 and 2004 Table 2: Projected Increase in the Number of People Aged 60 and Over in the UK by Age (000 and %), Figure 2: Projected Increase in the Number of People Aged 60 and Over in the UK by Age (000), Table 3: Number of People Aged 75 and Over in the UK by Age and Sex (000), 2006, 2016 and 2026 Figure 3: Number of People Aged 75 and Over in the UK by Age and Sex (000), 2006, 2016 and 2026 Pensioner Polarisation Men and Women Becoming More Alike in Finance... Table 4: Savings Profile for Elderly Men and All Men in the UK by Product by Age (%), 2004/2005 Table 5: Savings Profile for Elderly Women and All Women in the UK by Product by Age (%), 2004/2005 Table 6: Savings Profile for All Men and All Women in the UK by Product (%), 1997/1998, 2001/2002 and 2004/ But Big Pension Differences Remain Table 7: Pensioners and Their Pensions in the UK by Type (%), 2004/2005

3 Table 8: Weekly Household Income and Source of Income in the UK by Age of Household Reference Person (% and ), 2004/2005 DISTRIBUTION COMPETITIVE STRUCTURE MARKETING ACTIVITY CONSUMER TRENDS Pensions Retirement and Working Age Savings Inheritance Long-Term Care Financial Position Financial Services MARKET OUTLOOK 3. Annuities THE IMPACT OF `A DAY' DROP IN ANNUITY RATES August 2000 Table 9: Top Annuity Rates by Age and by Sex ( ), August 2000 August 2003 Table 10: Top Annuity Rates by Age and by Sex ( ), August 2003 September 2006 Table 11: Top Annuity Rates by Age and by Sex ( ), September 2006 Table 12: Changes in Top Annuity Rates by Age and by Sex (%), August 2000-September 2006 MILLIONS NOT CONTRIBUTING Table 13: Pension Status in the UK by Age, Sex and Employment Status (%), 2004/2005 Table 14: Occupational Classification of Individuals in Great Britain by Current or Last Job (000 and %), 2004/2005 Table 15: Estimated Income Bands by Sex (000 and %), 2005/ Equity-Release Plans THE HOME AS A PENSION

4 Lifetime Mortgages Home-Reversion Plans Lifetime Mortgage Specialists Bristol & West Mortgages Ecclesiastical Life Ltd Just Retirement Ltd Mortgage Express National Counties Building Society New Life Mortgages Ltd Northern Rock PLC Portman Building Society Prudential Corporation PLC Standard Life Bank Home-Reversion Specialists Bridgewater Equity Release Ltd Home & Capital Trust Ltd Partnership Home Loans Retirement Plus Ltd Both Lifetime Mortgages and Home-Reversion GE Life Ltd Hodge Equity Release In Retirement Services Ltd Key Retirement Solutions Norwich Union PLC PROVIDERS ARE CAUTIOUS Table 16: The UK Equity Release Market (number, m and %), 2004-Q ADVERTISING PATTERNS 5. Wealth Management PENSIONERS OWN WEALTH BUT DEMANDS ON IT ARE RISING Table 17: Savings in Pensioner and Non-Pensioner Benefit Units in the UK (%), 2004/2005

5 Table 18: Households' Savings in the UK (%), 2001/2002 and 2004/2005 OVER-RELIANCE ON PROPERTY PLENTY OF OPTIONS FOR THE WEALTHIEST RISK-AVERSE SOCIETY THE INTERNET BARRIER 6. Long-Term Care and Insurance HIGHER NEED, LESS PROVISION AXA Lifetime Care (AXA Groupe, France) GE Life (Swiss Re) Lincoln Assurance (Lincoln Financial Group, US) Norwich Union (Aviva, UK) Partnership Assurance Prudential PAYING FOR CARE MEDICAL INSURANCE FOR SENIORS LIFE AND DEATH 7. Promotion TOP ADVERTISERS AXA, SAGA AND NORWICH UNION Table 19: Leading Advertisers of Financial Services to the Elderly by Main Media Advertising Expenditure ( 000), Year Ending June 2006 AXA LEADS IN OVER-50S LIFE INSURANCE Table 20: Main Media Advertising Expenditure on Over-50s Life Insurance ( 000), Year Ending June 2006 NORWICH UNION HEADS EQUITY RELEASE Table 21: Main Media Advertising Expenditure on Equity Release ( 000), Year Ending June 2006 SAGA'S BROAD RANGE Table 22: Main Media Advertising Expenditure on Saga's Financial Products ( 000), Year Ending June 2006 GLOBAL PORTFOLIOS Table 23: Main Media Advertising Expenditure on Portfolio Management ( 000), Year Ending June 2006 REACHING THE OLDER CUSTOMER

6 8. An International Perspective IMF NERVOUS ABOUT GLOBAL SLOWDOWN CYCLING IN AND OUT OF WORK `THE FUTURE OF RETIREMENT' AMERICANS TO RELY ON WORK IN RETIREMENT 9. PEST Analysis POLITICAL AND ECONOMIC FACTORS Taking From Middle Britain Debt Overhang Poisoned Chalice or Brimming Cup? SOCIAL FACTORS Unhappy Society Changes TECHNOLOGICAL FACTORS Slow Replies Overloaded With Data Intelligent ATMs 10. Consumer Dynamics OVERVIEW Summary of Results Table 24: Summary of Results (% of respondents), 2006 PENSIONS The Basic State Pension is Too Low Table 25: The Basic State Pension is Too Low (% of respondents), 2006 The Income Tax Rate for High Earners Should Be Raised to Pay for a Better State Pension Table 26: The Income Tax Rate for High Earners Should Be Raised to Pay for a Better State Pension (% of respondents), 2006 RETIREMENT AND WORKING AGE In Future, People Will Need to Work Into Their 70s If They Are to Avoid Poverty in Retirement Table 27: In Future, People Will Need to Work Into Their 70s If They Are to Avoid Poverty in Retirement (% of respondents), 2006

7 I Think Employers Are Reluctant to Hire Workers Aged Over 60 Table 28: I Think Employers Are Reluctant to Hire Workers Aged Over 60 (% of respondents), 2006 SAVINGS I Am More Preoccupied With Repaying a Mortgage and/or Debts Than With Trying to Save for the Future Table 29: I Am More Preoccupied With Repaying a Mortgage and/or Debts Than With Trying To Save for the Future (% of respondents), 2006 It Is Not Worth Trying to Save a Lot of Money Because You Lose Entitlement to Means-Tested Welfare Benefits Table 30: It Is Not Worth Trying to Save a Lot of Money Because You Lose Entitlement to Means-Tested Welfare Benefits (% of respondents), 2006 INHERITANCE Children Should No Longer Expect to Receive a Financial Inheritance From Their Parents Table 31: Children Should No Longer Expect to Receive a Financial Inheritance From Their Parents (% of respondents), 2006 I Think That Inheritance Tax Should Be Abolished Table 32: I Think Inheritance Tax Should Be Abolished (% of respondents), 2006 LONG-TERM CARE The NHS Should Pay for Elderly Ill and Disabled People to Live in Nursing Homes Table 33: The NHS Should Pay for Elderly Ill and Disabled People to Live in Nursing Homes (% of respondents), 2006 FINANCIAL POSITION I Would Describe Myself As Either Well Off or Comfortably Off Table 34: I Would Describe Myself As Either Well Off or Comfortably Off (% of respondents), 2006 I Would Describe Myself As Struggling or Failing to Pay All My Bills on Time Table 35: I Would Describe Myself As Struggling to Pay All My Bills on Time (% of respondents), 2006 I Worry That I Will Not Have An Adequate Income As I Grow Older Table 36: I Worry That I Will Not Have An Adequate Income As I Grow Older (% of respondents), 2006 FINANCIAL SERVICES I Find That Information About Financial Services Is Confusing Table 37: I Find That Information About Financial Services Is Confusing (% of respondents), 2006 I Find Personal Finance Boring Table 38: I Find Personal Finance Boring (% of respondents), 2006 I Am Confident That Banks, Insurance Companies and Other Providers of Financial Services Are All Properly Regulated So That Customers Are Protected

8 Table 39: I Am Confident That Banks, Insurance Companies and Other Providers of Financial Services Are All Properly Regulated So That Consumers Are Protected (% of respondents), 2006 Banks, Insurance Companies and Other Providers of Financial Services Are More Interested in Young Customers Than in the Retired and Elderly Table 40: Banks, Insurance Companies and Other Providers of Financial Services Are More Interested in Young Customers Than in the Retired and Elderly (% of respondents), Company Profiles INTRODUCTION HSBC Table 41: Financial Results for HSBC Holdings PLC ($000, % and $), Years Ending 31st December THE ROYAL BANK OF SCOTLAND Table 42: Financial Results for The Royal Bank of Scotland Group PLC ( 000, % and ), Years Ending 31st December BARCLAYS Table 43: Financial Results for Barclays PLC ( 000, % and ), Years Ending 31st December HBOS (BANK OF SCOTLAND AND THE HALIFAX) LLOYDS TSB

9 Table 44: Financial Results for Lloyds TSB Group PLC ( 000, % and ), Years Ending 31st December NATIONAL SAVINGS AND THE POST OFFICE National Savings & Investments The Post Office SERVICES FOR THE ELDERLY INSURERS, BANKS AND SPECIALISTS American Life Aviva (Norwich Union) Table 45: Financial Results for Aviva PLC ( 000, % and ), Years Ending 31st December AXA In Retirement Services Key Retirement Solutions

10 Legal & General Table 46: Financial Results for Legal & General Group PLC ( 000, % and ), Years Ending 31st December Liverpool Victoria Table 47: Financial Results for Liverpool Victoria Life Company Ltd ( 000, % and ), Years Ending 31st December Northern Rock Table 48: Financial Results for Northern Rock PLC ( 000, % and ), Years Ending 31st December Prudential Table 49: Financial Results for Prudential PLC ( 000, % and ), Years Ending 31st December RIAS

11 Table 50: Financial Results for RIAS PLC ( 000, % and ), Years Ending 31st December Saga Services Standard Life Future Developments 12. The Future THE GOVERNMENT'S OWN PLANS CHASM BETWEEN DREAM AND REALITY MULTIGENERATION HOUSEHOLDS, MULTIGENERATION CARERS TRENDS IN THE JOB MARKET GIVE A CLUE TO THE FUTURE Table 51: Changes in Employment by Industry (000 jobs), June 1996 and 2006 ACTUARIES TAKE A LEAD TOO MANY PENSIONERS TO IGNORE 14. Consumer Confidence METHODOLOGY KEY FINDINGS THIS QUARTER THE WILLINGNESS TO BORROW Confidence Slips Slightly Table A: The Average Amount Consumers Are Willing to Borrow in Order to Purchase Expensive Items at Current and Constant November 2004 Prices ( and bn), November Significantly More Adults Are Willing to Borrow

12 Table B: The Number of Adults Willing to Borrow in Order to Purchase Expensive Items (000 and %), November SPENDING FROM SAVINGS Little Change in Spending from Savings Table C: The Average Amount Consumers Are Willing to Spend from Savings in Order to Purchase Expensive Items at Current and Constant November 2004 Prices ( and bn), November Saving Grows in Relative Importance Table D: The Average Amounts Adults Are Confident Spending to Purchase Expensive Items ( and %), November Further Sources Associations Publications General Sources Government Sources Other Sources Bisnode Sources Ordering: Order Online - Order by Fax - using the form below Order by Post - print the order form below and send to Research and Markets, Guinness Centre, Taylors Lane, Dublin 8, Ireland.

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