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The Wendy Chowne Column: Ageing Populations

09 February, 2015Wendy Chowne

My December column noted that there had been many pension reforms during 2014. This continued into the new year with the launch on Friday 15th January of the newly-styled ‘Pensioner bonds’. These are issued via National Savings and Investments(NS&I) and so offer the investor 100% security on their funds, as NS&I are backed by HM Treasury. Part of the government drive to encourage both savings and pension arrangement responsibility, these bonds are offered to customers aged 65 and over. They are essentially fixed-rate savings accounts which impose a loss-of-interest penalty for withdrawals taken during the term. There are two different terms, 1 year or 3 years, with the interest rate gross quoted at 2.5 % and 4% respectively. Given the current and past low savings rates being offered by mainstream providers, these are clearly attractive rates and the demand for the product resulted in the website crashing and pundits declaring it the ‘Black Friday of financial sales’ (Jackson, 2015). But the Government has made these available up to a limit of  £10 billion and customers can  place a maximum of £10k in each type of bond. Helen Saxon of MoneySavingExpert states that the ‘Government expects a million people’ will become Pensioner Bond savers.

The ‘ageing population’ seems set to grow, with life expectancy figures rising globally as well as within the UK. ONS figures in November 2014 indicate that Londoners have ‘experienced the most rapid increase in life expectancy’ within the UK and that average UK life expectancy has nudged up to an average age of 81. These figures underline the need for political will to support the ageing population, particularly when considered in the context of the UN’s belief that ‘the proportion of older persons is projected to more than double worldwide over the next half-century’. Whilst these facts and predictions are of key social and economic concern, they also pose challenges for financial services.

Age-segmentation has been used by organisations for decades but it is recognised that the ‘silver surfers’ from the baby boom years are wealthier than past generations and so this will have an impact on retail banks and particularly on wealth management functions who will seek to help customers manage their assets. Barclays Digital Eagles is an innovation which is reaching out to older customers by training staff to be sensitive to their needs and also to assist them in recognising the ‘benefits of being online’ (Barclays, 2014). This is undertaken via in-branch specialists who are able to assist older customers with mobile apps and the internet as well as Facebook, Skype, email accounts etc.

In the meantime the levels of sensible credit card spending have risen according to the BBA’s Richard Woolhouse who stated that ‘consumer spending looks well set for a strong year. It’s very interesting to see a record 43% of credit card balances incurred no fees in November – that’s the highest proportion since records began almost 20 years ago.’ Prompt payment shows that consumers are reluctant to take out credit without being sure of their capacity to repay.

The ONS also suggested another positive economic indicator by announcing that unemployment had fallen to 1.96 million in the three months to the end of November 2014. This is in stark contrast to the peak unemployment figure of 2.7 million in 2011. In addition the ONS statedthat annual average earnings to October 2014 increased by 1.4%.