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Rise of the Silver Spenders: Pensioners Powering the Economy
Growing old isn’t what it used to be. The view of the pensioner sitting at home by the fire running down their savings is increasingly a thing of the past. The older generation refuses to shuffle quietly into retirement, but is playing an increasingly active and enthusiastic role in this “Third Age Economy”. Indeed, today's retirement-aged individuals have some of the strongest spending power in the country.
The Office for National Statistics (ONS) says around 1.4 million people now continue to work beyond 65 – often in “higher status jobs”. According to research from the UK's largest peer-to-peer lender, Zopa, the recent pension reforms have led to a third of over-55s accessing some or all of their pension. On average, this has unlocked £36,500 per person - an influx of funds into the wider economy.
The silver pound is not a new concept, of course, and the rise of an increasingly tech savvy and ageing population has enabled this third age economy to prosper.
Zopa's figures show that the age group with the greatest disposable income of all is the 65-69s, while over-55s in general have more to spend on holidays, home improvements and cars. At £320bn a year, the over-50s now account for around 47% of all UK consumer spending, up from 41% in 2003, according to research from Saga and the Centre for Economic and Business Research. Without that input, UK economic growth would have been reduced by 4.2%.
Considering that the UK’s post-recession recovery has relied heavily on domestic demand, and with the recent uncertainty around China, it is likely that the third age will continue to play an increasingly important role in the UK’s growth beyond 2015. So how are “silver spenders” provided for by UK financial services?
Trust Turned to Rust
In the wake of the credit crunch, not to mention the misselling scandals relating to endowment mortgages, payment protection insurance and now claims of opaque charging by brokers of their commission, the vast majority of UK account holders were left with little to no real trust in their banks.
At the same time, the technology that is enabling the elderly to remain active consumers later into life is also making it easier for consumers of all ages to compare all kinds of financial products. The growth of online aggregators allows us to compare anything from insurance to bank accounts and from utility bills to mobile phone tariffs. Pensioners are savvier than ever and are perhaps now better equipped than ever been to shape their own financial security.
The banks are racing to keep up with this in an era when any given website can act as a whole-of-market mortgage broker and a loan can be pre-approved online in 5 minutes, emerging challengers in the financial services sector are proving much more agile in responding to the evolving marketplace.
Customer is Key
Anecdotally, this is where I have witnessed the greatest demand in terms of skillsets within the Financial Services market. I work with a number of “challenger” entrants into the market place who in a position to bring products to market very quickly.
Nimble and innovative emergents, with a customer centric approach are creating new products and categories which are tailored to the needs of the individual.
Their technology platforms are lean and not weighed down with the legacy issues of the larger banks. Product specialists and pricing professionals are in particular demand, as are the risk and compliance experts with the ability to embed the regulatory requirements.
Friends with Funds
Technology is undoubtedly driving the retail financial services space and Fintech, as it is otherwise known, is set for huge growth. Mobile banking is undoubtedly unlocking the market. Recent research from KPMG predicted that a quarter of the world's population will use mobile banking by 2019.
"Exponential growth in mobile banking is driving an era of Open Banking," the report stated, with author and KPMG UK digital and mobile banking lead David Hodgkinson adding that "banks must adapt or die".
Formerly the preserve of youth, technology is more user friendly than ever. It is technology, and it’s utilisation that will further enable this “third age” economy to establish itself in the mainstream.
Zopa's figures show that 57% of peer-to-peer lending now comes from the over-55s, proving that at least some of their unlocked pension funds are now benefiting borrowers directly.
From April 2016, peer-to-peer lending is due to become allowable as part of tax-free ISA savings, leading more than 75% of those surveyed to say they will consider lending more after that date.
As the conventional banking sector clamours to regain consumer trust, it seems that for the third age economy the future's bright - the future's silver.
Alex Lenihan, Consultant
Categories: Financial Services