UK research about pensions

The figures published by the Office of National Statistics about UK pension trends make sobering reading. About two thirds of pensioner households received private pension incomes in 2005/06, but 40% of pensioner couples, 55% of single men and 61% of single women pensioners have an annual private pension income of less than £1,000.

The figures show that the average annual private pension income for pensioner couples in 2005/06 was £2,115 for pensioner couples while for single men it was £1,553 and for single women £1,238.

To be honest we have always known that income distribution of people of pensionable age is just as fragmented into the ‘haves’ and the ‘have-nots’ as any age group, more so maybe. This is why it is essential to be rigorous with the way you segment the market.

Marketing magazine had a great article about this subject. The fact that I am quoted hasn't influenced on my judgement. Well maybe a tad. Dick Stroud

Borrowers approaching retirement owe four times as much as 10 years ago

A new study by Help the Aged and Barclays has revealed that 25% of people are approaching state retirement age with outstanding consumer credit commitments, owing four times as much as their counterparts did ten years ago.

Credit levels are on the increase across all age groups and Help the Aged is concerned about the impact this will have on pensioner poverty as new retirees face the double whammy of living on a fixed income while managing existing credit commitments. The report shows that unlike borrowers in other age groups, older people use credit cards to cover essentials such as the costs of bills or even to buy food.

Half of households headed by someone in their 50s, one in eight over 60s (over 1.5 million) and 4% of people aged 80-84s (about 60,000) are still repaying a mortgage.

None of this should come as a surprise. For the last couple of years I have been reporting that the fastest growing group of people seeking advice about debt problems are the 50-plus. Things are only going to get worse. Dick Stroud

Catch the Charmed Generation whilst you can

The Sunday press contained a couple of scary articles.

The first concerned the increase in selling equity release schemes to people as young as 55.

The argument goes that because of the credit crunch and the level of indebtedness, people are needing to cash-in on the equity in their property much earlier than is financially sensible. In truth this has been happening for a while with people taking on second mortgages to fund current expenditure. Great as long as house pricing go up – disaster when they come down.

Stonehaven was the first to make a big splash in the fiftysomething market when it set up for business 18 months ago. It allows 55-year-olds to release up to 12 per cent of the value of their property as cash and then charges interest on this at 5.9 per cent, fixed for life. You can choose either to pay that interest as you go along or never pay any of it and let the whole debt roll up and be paid off when you die. Basically the kids watch their inheritance do a slow waltz out of the home into Stonehaven’s bank account.

Don’t get me wrong. I am no knocking Stonehaven or any other company operating in the equity release business. The only (just say that again) the only way that a large chunk of the 50-plus will be able to fund their retirement is by releasing the value of their properties. Somebody has to provide the financial instrument to enable that to happen. Whether it is the right thing for an individual to buy is another matter.

This brings me on to one of the causes of the problem. The lack of sufficient pension provision.

The Telegraph had an article titled: Private pensions take-up drops to one in four.

A report, from Policy Exchange shows that only one in four of Britain's 26.2 million employees have a private pension in addition to the basic state pension. This represents a sharp fall from 1991-92, when 39 per cent of workers were putting money aside for later life.

Taxpayers are struggling to save for their own pensions, while the annual burden of contributing to public sector pensions is predicted to rise by 33 per cent by the 2030s.

Only 15 per cent of private sector employees are now in final salary schemes and a mere four per cent are in schemes still open to new members.

Final salary schemes - where the pension is based on length of service and salary - are being replaced by money purchase schemes where the value of the pension is dependent on how much the employee and the employer put into the fund.

Yet the total of employers' and employees' contributions to the average money purchase scheme is only 9% of income which is not enough to build a decent sized pension.

Do you see the symmetry of all of this? Not enough pension – only asset the home – leads to earlier and earlier release of home equity.

The Charmed Generation (the 2.5 million wealthy 50-plus) are truly a dying species. Better start marketing to them before it is too late. Dick Stroud

That’s financial services for you

Whenever I attend a 50-plus focus group and the topic of banks, building societies and other variants of financial service companies are discussed I can guarantee there will be a huge intake of breath and then tidal wave of vitriolic abuse.

Recently I did some research looking at the 50-plus’s reaction to different types of advertising creative. The ads from financial services companies had to be dropped from the sample because the viewer’s reaction was not about the brand and the creative but the category – shysters and schmucks would be a glowing way of putting it.

Now I read that in the UK there are 27 accounts restricted to senior savers – but they can all be beaten by non-age specific competitors. A quote from the analyst who did the research:

"Accounts restricted to senior savers have been market leaders in the past. However, the eagerness of many providers to attract retail funds at the moment means that – without exception – the over-50s-only savings products can be beaten by products without such age-related restrictions."

Anybody from the Financial Services listening? Dick Stroud

ING Direct - good use of Web video

It is great to see a large financial services company start using Web video. ING Direct, one of the world’s largest online banks, uses this video – prominently shown on the home page – to provide customer testimonials. OK, you can argue about the style but I reckon it is pretty good. Notice anything about the age of the ‘customers’? Dick Stroud.

€327 doesn’t buy you many pints of Guinness

Research in the Green Paper on pensions, issued by the Irish Government, found that the average net income for pensioners in 2005 was €327. The average weekly income for all households was more than double this at €776. Less than half.

Allied Irish Bank has done its own research that concludes that over 50% of the 50-plus has no private pension and will be forced to rely on the State to pay for their retirement.

These dreadful figures are not that much different from the UK. So much for a land of affluent Baby Boomers. Dick Stroud

The UK's over-60s own £841 billion in housing equity

Norwich Union is a provider of financial services and equity release (reverse mortgages).

It has just published some research that quantifies the amount of housing equity owned by the 60-plus.

This staggering amount of money equates to a grand total of £82,446 each. This figure seems on the low side. I suspect that they have divided £841 billion by the total number of over-60s not just the number of home users.

The research also showed that 68% of the over-60s would never consider selling their homes.

Of the remaining respondents, 26% would only consider finding a new home if life-changing events such as a partner's death, decreased mobility or a move into long-term care occurred. However, as revealed above, a small number of over-60s (6%) did say they would consider selling their property to release money. Interesting stuff. Dick Stroud

Factlet about the UK’s savings and insurance market

There has been a bevy of facts and figures published this week about the 50-plus and finance.

Not sure what you can do with them but here they are:

1. People in their pre-retirement years have the highest average value of savings (£10,338).

2. Retired people hold an average of £9,450 of savings.

3. The 35 - 54 year olds only have an average savings of £7,697.

4. 16% of new savings accounts were taken out by the retired

5. In general insurance products, Age Concern, RIAS and SAGA have an 18% share of the over 50s market -which equates to an 11% share of the total market.

6. Only 5% of customers at these brands are considering switching away in the next 12 months, compared to 9% of the market.

A couple of comments. Don’t forget averages are next to useless numbers. In all age groups there will be a few with mega bucks and a lot with very little. I am surprised that the combined market share of the three big 50-plus companies is so low (18%) – I would treat that number with caution. Dick Stroud

Maybe Generation Y is not that different

I have a Google alert that picks up content related to Generation Y and X. It is surprising how little is published about either group.

An article appeared in MediaPost’s Marketing Daily about the way banks are failing to meet the expectations of Gen Y.

If you do a global search and replace on the article and swap Gen Y for Boomers I bet you would still read the article and nod in agreement.

This is says one of two things. Perhaps my thoughts about age neutrality have broader application or maybe it is because marketing journals publish such nebulous rubbish that can apply to anybody. Now I know what happens to marketing journalists when they retire – they write horoscopes. Dick Stroud

The heard mentality of financial institutions

You can picture the situation. It is a training course being given by some hot-shot marketer to a bunch of bright eyed and bushy tailed brand managers from a financial services company. The PowerPoint slide is titled “The 3Gs”.

In a hushed voice the marketing guru claims that they are about to see the biggest marketing weeze of 2007. This, he claims, will enable the re-birth of the audience’s mesmerically boring savings and loan accounts.

The slide slowly builds and the two words appear. First the word ‘grey’ then ‘green’.

The guru explains: “All you need to do is to slap ‘50-plus’ or ‘green’ on your existing products”. Why he asks can such an obvious trick work? Slowly the third word appears – Gullible. He sniggers to the audience that the poor old and eco-guilty punters are so dim they will genuinely think there is something special about these products.

Customers, he says, are falling over themselves to buy products with the word green in the product name or that are coloured green. It is the same with making your customers think that being 50-plus confers some right to buy an extra competitive product.

The guru concludes the presentation and moves speedily to the next client and gives exactly the same presentation.

This tale is the only explanation I can think to explain the heard mentality of UK Financial Institutions, 36 of which are offering specialist accounts for the over-50s market. It is slight less for the number providing eco-friendly accounts. As this article explains, in most cases an over-50 can get a better deal buying a product that is available to all ages. Maybe the word ‘gullible’ applies to both the institutions and their target market. Dick Stroud

The mismatch between strategic and tactical marketing

Why did HSBC and Axa spend a shed load of money researching the 50-plus market? Don’t get me wrong – I am not critical of companies taking an interest in the older market – I encourage them to do so. What I don’t understand is why this research appears to have so little impact on their tactical marketing.

I spend a lot of time studying this market and I rarely hear about these two companies or notice references about their research. Why is this?

I suspect, and it is no more than a suspicion, that somebody on-high with HSBC and Axa thought it was a good thing to do. The money was spent, the research completed and the glossy marketing comms materials produced.

Down at the coal face of marketing the troops were unaware, unprepared or disinterested in this gift that corporate marketing/research delivered.

So there it sits in a state of digital decay. No doubt somebody will tell me how wrong I am. Dick Stroud

BrandChannel.com are featuring Boomers

BrandChannel decided it was about time it did a feature on Boomers. If you know anything about the Boomer / 50-plus market you aren’t likely to learn very much. Lots of broad sweeping statements and the usual splattering of Boomer facts and examples.
Home: They're getting older, but the Baby Boomers remain a booming market.
Features Profile: Can Ameriprise grab the older Boomer market from older financial services brands?
Papers: Can your brand attract the wired Baby Boomer?
Brandcameo: Brands rise in Fantastic Four: Rise of the Silver Surfer.

Mary Furlong’s paper about the ‘wired’ Baby Boomer is worth a read although I was surprised how little mention it made about Web video. I have seen estimates suggesting that video will take 98% of all Internet bandwidth in the next 24 months so it is something you cannot ignore. I think it will be the biggest revolution to hit the web in a decade and will especially change the way companies communicate with older audiences.

But I am not complaining. Anything that is likely to dent the prejudices of the marketing world to take more account of the older consumers has to be a good thing. Dick Stroud

Good videos boring web site

The press release reads: “Financial professionals, journalists and consumers can now access the most comprehensive source of information regarding solutions to the Baby Boomer retirement crisis”.

This ‘most comprehensive’ Web site is hosted by the Million Dollar Round Table (MDRT) - The Premier Association of Financial Professionals (so it says)

Well guys I cannot agree with your claims but you do have some really good stuff on the web site, especially the videos of the conference sessions. I wish all organizations would publish their conference proceedings in this way.

Surely you could have come up with a more enticing and professional looking web site. Dick Stroud

'Bank of Mum and Dad' lend £18,000 on average for first homes

Nearly a third of potential first-time buyers (31%) anticipate financial help from their parents, according to new research commissioned by the Council of Mortgage Lenders. But even more (35%) say that they would need financial help to be able to enter the housing market.

Among all of those who are already home-owners, 23% say that their parents helped them. But for younger, more recent buyers, the figure is much larger. 39% of those aged under 30 had received help, and more than 40% of those who have entered the market since 2004.

I wonder if mortgage lenders have taken on board the implications this research. The over-50s are clearly an important part of the decision making process about sources of finance when their kids buy a house. Dick Stroud

A fine line between marketing and insulting

Should a product that this claimed to be designed for the 50-plus be better than one that is available to Joe Public? There are no rules that say that they must, but you leave yourself open to hostile criticisms if they are aren’t.

This article in the Telegraph looks at a range of financial products and compares the 50-plus vendors (Age Concern, Saga, RIAS and intune) against non age-related vendors. In nearly all cases it found the 50-plus vendors did not provide the best deal.

It is now so simple to compare financial products using the Web that I think those claiming specialist 50-plus products need to be very careful if they are not providing something of real value. There is a thin line between reasonable marketing behaviour and insulting your potential customers’ intelligence. Dick Stroud

AXA Equitable Retirement Scope

This is a document for the library. AXA has been conducting a worldwide study of attitudes to retirement for the past 3 years.

This 120 page report shows the results for the United States, with international comparisons. Lots of good stuff. Dick Stroud

Wealth of Over-50s Reaches Record Levels

The UK finance company, Abbey National, has its research covered in a couple of UK publications. The most detailed is in The Finance Daily.

Why I am not surprised that Abbey makes no mention of this research or provides any links on its own web site. I despair at the way companies have yet to wake up to the new world of news dissemination and the opportunities of bloggers.

Here are a few of the factlets from the research:

The wealth of the over-50s generation has rocketed 45.6 per cent in the past five years to in excess of five trillion pounds (£5,000,000,000,000)

The personal wealth of this demographic is greater than the annual GDP of every nation except the USA. It is even greater than the combined GDP’s of Germany, UK and France.

The over-50s owns nearly 75 per cent of the UK’s wealth. They hold 60 per cent of all savings and are responsible for over 40 per cent of all consumer demand.

OK, OK I think we have got the picture. They have lots of dosh. Tell us something we don’t know. Dick Stroud

Let’s hope Help the Aged really is intune with the market

Help The Aged is to sell home insurance and other financial products to the "grey market".
The charity is to set up a financial services arm, Intune, selling insurance products (e.g. travel, home and motor insurance)

The charity hopes the £5m venture with insurer Liverpool Victoria will aim to be profitable within three years.

"Many companies are guilty of lumping the over 50s into one amorphous 'grey' market and being inflexible or discriminatory with their products and services," said Anne Grahamslaw, Intune's managing director. You cannot argue with that!

Well Intune has been fortunate in having a real life case study of how not to appeal to the 50-plus market, with the Heyday disaster, so let’s hope it has learnt some of the lessons.

I just wonder if mixing charities with commercial ventures is fundamentally flawed. Time will tell. Dick Stroud

Freetirement nation is the envy of Generation X

This blog posting covers three subjects linked together by the word ‘unprofessional’.

Friends Provident (UK Financial Services Company) recently published some PR-research containing the two mandatory bits of content:

1. Headline grabbing statements (i.e. “the baby boomer generation have achieved a form of perfect work/life balance that Generation X strive for but may never afford”).

2. Silly name (“The Freetirement Generation”)

The report’s press release doesn’t contain (as far as I know) any inaccuracies, it is what it doesn’t contain that matters. No mention of the significant (maybe the majority) of the age group who are not so financially fortunate. No mention that very soon the over-60s will be the largest group of people seeking advice about debt problems. This is an unprofessional selective garnering of the facts for a few cheap headlines.

The second unprofessional factor concerns not answering e-mails. I approached Friends Provident on two occasions to send me a copy of the report. I am still waiting to receive it. Not good.

The third unprofessional action concerns the web site that Friends Provident has created for the Freetirement Generation. Words fail me – they even included a photo of a guy with a surf board! Why oh why do people think that ageing results in a passion for aquatic activities!

Not a good start to Friend Provident’s 50-plus marketing efforts. Dick Stroud

Funky Hartford Stag?

The Hartford Financial Services Group, a really big US financial services and insurance company is launching a new marketing campaign encouraging Baby Boomers to “Prepare to Live” in retirement.

“Times have changed,” said Ann Glover, chief marketing officer for The Hartford. “Workers know they cannot depend on social security benefits, defined pension programs or retiree health benefits to fund their retirement, and are unsure about their ability to pay for rising health care costs in retirement. Through this campaign, we are encouraging Baby Boomers to understand their personal financial picture and goals and take control of their financial future. By seeking education and facts about their own situation, they can prepare with confidence for what should be one of the most rewarding times in their lives – their retirement.” So now you know.

Same Stag, but now using computer-generated imagery. Does it work for you? Dick Stroud

Enough with baby-boomer predictions

This a grumpy lady. I have to say that I share many of her irritations.

Here is a sample: “I would rather watch cartoons on Nickelodeon than one more television stint of Dennis Hopper’s beach commercial telling us that we are not living our parents’ retirement. Dennis, after all, at age 70, should more properly be selling to our parents anyway”. And so it goes on. Dick Stroud.

Eons raises more money

Eons, the “50- plus media company for loving life on the flipside of 50” today announced $22 million in new financing.

Interestingly, the press release makes no mention of visitors, visitor growth, revenue, profit forecasts, impressions…….

Still, Eons must be doing a lot of something to convince the VCs to stomp up another $22 Million. Dick Stroud

Another ‘exclusive’ discount for the over-50 (ish)

Amongst the pile of stuff that fell out of my Economist magazine this week was this item from Standard Life.

Good to see that one of the stalwarts of the British Finance industry is targeting the 50-plus. Not the most eye-watering creative I have ever seen but it does the job. Dick Stroud

RIAS gets a new agency

I bet the staff at Watson Phillips Norman are celebrating having just won the £10m customer acquisition and retention and brand development account for over-50s insurer RIAS as sole agency.

RIAS, established in 1992, has been leading the way (after SAGA) in capturing the over-50s insurance for home, motor, travel and pet insurance and now has over 880,000 customers.

It will be interesting to see how the RIAS brand develops – well at least we know who to blame or congratulate. Dick Stroud