28 th May 2015 Why are we here? Source: ONS 2012-Based National - PowerPoint PPT Presentation

Financial Services and the Privatisation of Risk Trajectory Trends Breakfast 28 th May 2015

Why are we here?

Source: ONS 2012-Based National Population Projections 10,000 15,000 20,000 25,000 30,000 5,000 0 2012 12,280 2013 2014 2015 2015 2016 2017 2018 2019 2020 2021 2022 2023 UK Pensioners (thousands) 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 Why are we here? 2035 2036 2037 2041 2046 2051 2056 2061 2062 2066 2071 2076 2081 2086 2087 2092 25,443 2102 2112

Why are we here? UK Ratio of Working Age to Pension Age Adults: Population Projections 4 3.21 3.5 2.74 3 2.5 2 1.5 1 0.5 0 Source: ONS 2012-Based National Population Projections

Source: Ipsos MORI Issues Index 10% 20% 30% 40% 50% 60% 70% 80% 0% Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Pensions/Social Security Apr-09 Jul-09 Oct-09 Jan-10 Ipsos MORI Issues Index Apr-10 Importance of pensions as a Jul-10 3% Oct-10 Jan-11 Economy Apr-11 Jul-11 Oct-11 Jan-12 NHS Apr-12 Jul-12 Oct-12 national issue? Housing Jan-13 Apr-13 Jul-13 Oct-13 16% Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15

Issues at family level YouGov: which of the following do you think are the most important issues facing you and your family? Pensions Health Housing 50% 45% 40% 35% 30% 25% 20% 15% 10% 5% 0% Source: YouGov Issues Tracker

Perceptions of pension complexity (2013) 60% Agree strongly Agree Neither agree/disagree Disagree Disagree strongly 52% 52% 51% 50% 47% 47% 45% 42% 40% 30% 20% 10% 0% 15 to 24 25 to 34 35 to 44 45 to 54 55 to 64 65 to 74 75 and over Age Source: 2013 British Social Attitudes Survey

Compromised Consumers Low sense of choice/control + High sense of time pressure + Exclusive focus on price 45% % of compromised consumers by age and nation 40% 35% 30% 25% 20% 15% 10% 5% 0% UK France Italy Germany Spain All adults 18-34 35-54 55+ Source: Trajectory Global Foresight; 2013 &2014

The privatisation of risk “National compulsory insurance for all classes for all purposes from the cradle to the grave .” (Winston Churchill)

Pension reforms Announced in the 2014 Budget, reforms • which came into effect on April 6 th 2015 have drastically changed the way in which pensions operate. High profile elements of the reforms include: • – The ability to cash out your pension pot – the first 25% tax free. – Increased flexibility of income drawdown rules. – Allowing those with ‘capped’ drawdown to convert to a new flexible drawdown fund.

Immediate reaction

The New Morality Brands: Citizen to Personal C-Suite Scrutiny Self-Preservation Society financial crisis, recession, austerity, stagnation, debt, youth, income, employment Decline of Deference Value Hunting Anxiety Society Discretionary Thrift Hyper-Connectivity Mercurial Consumption The Compromised Consumer

Austerity, pensioners and the New Morality

One year on

An enduring crisis of trust? Edelman Trust Barometer 2015 – UK Results 2014 2015 Trust Increased Trust Decreased 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Source: Edelman Trust Barometer 2015 - UK Results

Bank Fines Banks clobbered by $6bn forex-rigging fine but share prices rise as penalties less severe than expected Biggest bank fines in history: 2014 could be costliest year ever as value of fines rise by 30 per cent Who made the FCA’s 2014 naughty list: Which institutions received the biggest fines last year?

Pensions mis-selling scandal? Budget freedoms could lead to scandal ‘worth billions’ Written by Adam Cadle 15/01/2015

One Year On 7 th April 2015 1 st March 2015

Consumer responses Plans regarding tax free allowance (total %) 35% 30% 30% 27% 25% 20% 14% 15% 12% 10% 6% 5% 5% 5% 0% I don't have a plan I'm not sure Take the 25% tax- Take my whole Take only the 25% Take only the 25% I won't be able to at the moment free cash pension as cash in tax-free as cash tax-free as cash take any money out immediately and one go and take a taxable and leave the rest when the new rules take the rest of the regular income, but invested come into effect pot as cash as and not cash from the when I want it rest Source: Ipsos MORI Defined Contribution Pensions survey, October 2014

Consumer responses What do you plan to do with the cash you take from your pension? (total responses %) 25% 23% 22% 21% 20% 16% 14% 15% 13% 12% 10% 8% 5% 4% 5% 3% 0% Source: Ipsos MORI Defined Contribution Pensions survey, October 2014

Responses by gender Plans regarding tax free allowance by gender 40% 35% 30% 25% 20% 15% Male Female 10% 5% 0% Take my whole Take the 25% tax- Take only the 25% Take only the 25% I don't have a I won't be able to I'm not sure pension as cash free cash tax-free as cash tax-free as cash plan at the take any money in one go (the first immediately and and take a and leave the moment out when the 25% tax free and take the rest of taxable regular rest invested new rules come the rest taxed) the pot as cash income, but not into effect as and when I cash from the rest want it Source: Ipsos MORI Defined Contribution Pensions survey

Responses by gender What do you plan to do with the cash you take from your pension? (responses by gender) 40% 35% 30% 25% 20% 15% Male 10% Female 5% 0% Source: Ipsos MORI Defined Contribution Pensions survey

Responses by social grade Plans regarding tax free allowance by social grade 50% 45% 40% 35% 30% 25% AB 20% C1 15% C2 DE 10% 5% 0% Take my whole Take the 25% tax- Take only the 25% Take only the 25% I don't have a I won't be able to I'm not sure pension as cash in free cash tax-free as cash tax-free as cash plan at the take any money one go (the first immediately and and take a and leave the rest moment out when the new 25% tax free and take the rest of taxable regular invested rules come into the rest taxed) the pot as cash as income, but not effect and when I want it cash from the rest Source: Ipsos MORI Defined Contribution Pensions survey

Responses by social grade What do you plan to do with the cash you take from your pension? (responses by social grade) 40% 35% 30% 25% 20% AB 15% C1 10% C2 DE 5% 0% Source: Ipsos MORI Defined Contribution Pensions survey

Statutory provision of guidance

Financial sector focus?

Older generations and tech 0% 20% 40% 60% 80% 100% TV set Computer Radio set Adults aged 16+ 16-24 Smartphone 65+ Landline phone Printed copy Tablet Stereo/home system Standard mobile phone Games Console e-Reader Other electronic device Source: Ofcom Media Literacy Tracker

Financial Vision With faltering steps, an elderly customer navigates her way to the end of a queue in the bright, airy and revamped branch of Barclays Bank. She looks at the self-service kiosks, notes the absence of traditional glass counters, spots staff dealing with enquiries via tablet computers and turns to her friend. "It's bedlam in here," she says. “Any Time, Any Place, Any Where” Anna Botin, Santander http://www.bbc.co.uk/news/business-28851597 http://www.ft.com/cms/s/0/a5cfd1ba-9ffa-11e4-9a74-00144feab7de.html#slide0

Good Practice Clear signposting Multiple communications channels Easy transference options Telephone access to advisors Plain English Text to speak services

SUMMARY AND QUESTIONS

A programme for success Consumer rights and education provision • A robust digital inclusion and education programme • Universal consumer touchpoint provision • Seamless, secure, cross-service personalisation • Visible public regulation, resourcing and guidance • Deeper insight into audience needs - product innovation • Effective, accessible, rapid consumer right of redress • Radial transparency in pricing, performance, risks, returns •

The Trust Equation Source: David Maister - The Trusted Advisor – The Economics of Trust

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The post-recessionary consumer (UK)? All adults 18-24 25-34 35-44 45-54 55+ 80 70 60 50 40 30 20 10 0 Fighting rising When jobs are The world today is I often feel under Low sense of Getting the Ethnic diversity Expect financial prices most scarce nationals a more dangerous time-pressure in my choice and cheapest price erodes national position of important to me should take priority place than it used day-to-day life control when shopping is unity household to get over immigrants to be VERY important to worse me