Life and pensions set for a good year in 2016
The last few years have been difficult for all of us working in the financial services sector. The hangover from the boom that preceded the global financial crisis of 2008 lasted far longer than originally predicted, and the ‘plink, plink, fizz’ of the austerity cure was slow to work its magic.
However, 2015 was very much a year of recovery in the UK and Irish markets and it is, at last, possible to see the positive growth in national economies being reflected in increased purchases of financial products, as people begin to have confidence again in the future and, therefore, start planning for it. This has been encouraged by the on-going implementation of auto-enrolment and the pension freedoms, which have made people re-consider their use of financial products and made providers review and extend the range they have on offer.
The UK has led the way in increasing the sale of financial products with the on-going roll-out of the auto-enrolment programme, whereby every qualifying worker in the country must be automatically enrolled into a pension scheme and allowed to opt-out if required. This nudge approach plays on the inertia of the majority of the workforce, who want to save but like St. Augustine, not yet.
This nudging of those who never saved before into the shallow end of long-term saving is creating ripples in the form of increasing interest in financial products in general. Tapping into this in a cost effective way is going to remain a key challenge for the life and pension sector over the next 12 months. When you add in the bedding in of the pension freedom policy, and the clear signals that the whole taxation basis upon which pension savings are predicated is likely to change in the 2016 budget, you can see that this year promises to be a turbulent one in the long-term savings market.
The increase in usage of both smartphones and tablets grows apace. In 2015, 66% of UK adults had a smartphone, up from 39% in 2012, and it is now the primary means of accessing the Internet. Indeed tablets and smartphones are now the primary means for Internet access for 52% of the population, including a surprising 32% of over-55s. Of these 44% now use the smartphone for online banking.
The growth in usage has been rapid and shows no sign of levelling off. And as more people get used to using their smartphone for banking, they will want to use it for other financial transactions. Our industry ignores this issue at its peril.
Here in Ireland, the same technology path is being followed putting similar pressures on Irish life and pension providers to innovate in the technology space to provide a more customer-centric offering.
2016 is also an election year in Ireland and all the signs are that some variety of auto-enrolment is likely to be established by whatever government is formed after the vote. This is likely to lead to a major boost in the life and pensions market; similar to the effect it had in the UK.
Will 2016 be the year when life and pension providers grasp the opportunity and upgrade creaking legacy systems for ones that can support digital-age offerings? Or will it be the year when companies already established as Internet retailers, e.g. Amazon, e-Bay, become new-entrants in a very lucrative life and pension’s market that has been slow to innovate?
It is too early to tell but clearly the pace of technological, regulatory and political change is not going to slow down. If anything, it is likely to increase. 2016 promises to be an exciting one for all of us in the industry.
What do you think? Let us know in the comments below!