10 July 2015
Budgets come and budgets go and you can look at them from many perspectives. Financial Services specialists tend to look at them first through the lens of their customers, then at what opportunities they might create, and finally how they might impact personally. It’s all sensible stuff, but it’s all a bit short-term.
Look at it from the point of view of the economy and you get a different perspective. George Osbourne may be introducing new initiatives that start now, but essentially he’s having to take a long-term view on how they might impact on nation’s finances in half a century’s time. In macro-economic terms there is little he can do strategically for those retiring in the next 10 years – although he addressed that issue tactically with pension reforms in the previous budget. However, as steward of the national debt, he is obliged to look at what will happen when those who are leaving school and university now retire 45-50 years hence.
We think that, between this budget and his previous effort that shook up pension legislation, he’s done a pretty good job of looking after what politicians still refer to as the ‘working classes’. But let’s put the ‘working classes’ aside – actually we’re not sure what that means any more as most of us go to work. Instead let’s think about the ‘saving classes’.
Ask anybody in the FS sector to name the biggest problem the UK faces and you’ll probably get an answer somewhere around the fact that ‘people in the UK don’t save enough for their retirement’. There are many and varied reasons for that. But from our point of view the biggest of these has been the legacy of a lack of awareness among the traditional ‘working class’ that people need to save over and above their expected State Pension. This has increasingly been compounded by natural factors like increasing life expectancy and rising costs of living.
Whilst others have swerved the bullet on State Pensions no one can deny that George Osbourne has made the importance of saving loud and clear. The State Pension is simply no longer equipped to provide the sort of income people need in a long-lived retirement and the UK Economy will increasingly struggle to service it. No government can sensibly create the expectation that National Insurance paid now will see you through 20 years of retirement 45-50 years in the future.
Sure in getting it right, and setting expectations for the ‘now’ and the ‘next’ generation, he’ll have to make some readjustments that put some noses out of joint today. Mostly however the noses are those best-placed to take the hit.
But let’s get back to the ‘saving classes’. Or more importantly the ‘not yet saving classes’. Apart from raising awareness of the need to save, and encouraging people to save, Osbourne seems to be creating an environment where more discretionary cash will make it easier for more people to save.
Without doubt there will be those who still cannot afford to. However, on a ‘more of the people more of the time’ basis, we feel in the coming years the FS industry will continually see an increasing amount of assets under management – which is exactly what the industry needs to survive. More money under management will suit the providers. More pension and other savings to work with, along with more choice of what to do with them, will suit advisers as clients will not only need more advice but will be able to pay fees.
Of course the benefits of these changes may not be reaped by individuals who are in the business today. But in terms of the industry at large these measures – that have forced what had become something of a slumbering sector to wake up, smell the coffee and adapt – will make all aspects of Financial Services more relevant. What’s not to like about that?
Naturally, as a creative agency working in the FS sector, we have some good ideas about how to use this budget to your commercial advantage! Give us a call.
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