Context

By 2020, the number of consumers aged over 65 in the UK is expected to increase by 1.1 million, and by 2040 almost one-in-seven people are expected to be aged over 75. Consumers aged 85 and over are the fastest growing segment of the UK population. The scale and rapidity of this changing demographic clearly has huge implications for financial services, and the types of products and advice that need to be made available to the older population.

The study

• The Financial Conduct Authority (FCA) produced this report as part of their series of occasional papers in 2017. The study aims to:
• Help firms identify and understand the specific needs and characteristics of older consumers
  • Encourage sustainable change by helping create an environment that naturally delivers suitable solutions for older consumers
  • Challenge financial exclusion
  • Ensure firms recognise the potential vulnerabilities of certain groups of older consumers
  • Encourage firms to mitigate potential risks or harm caused by demographic change
• A case study approach was taken to scoping the main problems facing older consumers. The issues identified were:
• Understanding older consumers
  • Engagement with retail banking
  • Third party access and planning ahead
  • Upper age limits and product innovation in the mortgages sector
  • Long-term care
• These issues were explored using an array of methods, including:
• Desk-based research
  • Stakeholder engagement
  • Data analysis
  • Consumer segmentation
  • Reviews of strategies
  • Consultation with FCA sector specialists
• The study drew on the FCA’s ‘Consumer Expectations’ research and their nationwide ‘Lives Survey 2017’. A segmentation tool that was provided by Experian was also used to identify behaviours, characteristics and needs of different groups of the population.

Key findings

While older consumers are not necessarily vulnerable as a whole, they are more likely to experience ‘transient’ or permanent vulnerability, particularly among the ‘older old’ (i.e. those aged 75 and above). This can be due to:

• Health
• Lack of financial resilience
• Low financial knowledge or confidence
• Life events, such as loss of income, bereavement or change in relationship status

Three areas where action is needed are highlighted:

• Products and services often appear to be designed for an average consumer, rather than taking account of an ageing population.
• while not all processes should be designed around the requirements of an ageing population, firms need to consider their target markets, and how they can support an ageing population.
• Firms and regulators need to be aware that the landscape is continuously changing due to the shifting demographics, and need to be alert and responsive to this.
• Returning to the themes presented in the previous section:
• • Staff should be trained to notice vulnerable consumers and refer them to a specialist team.
  • Banks should create a safe environment where consumers feel comfortable discussing any financial difficulties.
  • Firms need to consider older consumers when developing distribution channels or using new technology.
• • Industry groups should consider making it easier for older people and their carers to set up third party access arrangements.
  • Firms could proactively tell consumers about their third party access arrangements.
  • Firms should work with trade bodies to identify and clarify the challenges they face in balancing protection and access, and develop best practice solutions.
• • Lenders and intermediaries should consider reviewing current practice and policies surrounding older consumers.
  • Lenders should consider how they direct people to alternatives when they are declined for credit due to their age or affordability issues.
  • Better tools could be developed to help consumers evaluate and select their borrowing options in later life.
• • Long-term care is a crucial policy issue to address. However, because of the uncertain policy landscape, and often lack of consumer demand, there appears to be limited appetite for financial services to create products and offer services to underpin future funding of long-term care.
  • The report states that long-term care issues are policy areas for the Government to address rather than the FCA, though the FCA can monitor if and where consumer harm is occurring.
• The FCA anticipates a follow-up report in three-to-five years time, giving firms and the regulatory environment time to respond to the issues raised in this report.

Points to consider

• • While details are given on the sources of the data used in this study, a detailed description is not made available, and readers would need to look elsewhere to ascertain the robustness of the sources. Full information is however included on the segmentation process.
• • This report is relevant to all stakeholders and policymakers with an interest in developing policy frameworks and informing the regulatory environment in relation to older consumers.

Full report

Ageing population and financial services - full report