|
|
 |
|
Viewing report
|
|
|
|
Financial Services Marketing to BCs Market Assessment 2009
Key Note Publications Ltd, May 2009
The Bs, C1s and C2s who make up `Middle Britain' do not have a broad base of affluence. Most of their wealth is in residential property, supported by (beleaguered) pension funds. The apparent affluence of the 1990s and early 2000s was funded mainly on credit and property equity withdrawal.
The number of independent retail banks in the UK shrank in 2008 and the collapse has continued in 2009. The building societies helped to shore up UK financial services, and would have formed an even stronger foundation if most of the leading societies had not demutualised in the 1990s.
Middle Britain's preoccupation with borrowing to build up housing wealth has reduced the sums available for pensions, savings and investments, on which many households have spent very little in recent years. Furthermore, real interest rates fell below zero on many instant-access accounts in 2009. The hardest hit among B, C1 and C2 savers include the many over-65s who do not use the Internet and thus cannot access online accounts, which generally offer higher rates than branch or postal accounts. One option for individuals with capital, who want to earn a better return on it, is direct lending via schemes such as the online social lender Zopa, although social lending schemes on this model are not covered by the Financial Services Compensation Scheme (FSCS).
In 2007, UK households collectively spent around £19.69bn more than their income. Many mortgage borrowers overstated their incomes to get the loans they wanted. Falling house prices and declining pension funds, as well as the near-zero interest rates on savings, rising unemployment and stagnant incomes mean lower consumption, which in the absence of rising exports results in a decline in gross domestic product (GDP). Taxation revenues fall, making it harder for the Government to balance public spending and reduce the inflating National Debt. Despite high debt levels among individuals, the amounts are small compared with the uncertain but vast sums at risk in financial derivatives.
Paid-for advice is often too expensive for people on moderate incomes. The authors consumer research showed that one person in three believed they could not afford independent financial advice — but more importantly, only one in three people agreed that financial advice was worth paying for. During 2008, the Financial Services Authority (FSA) conducted a Retail Distribution Review, which recommended much clearer differentiation between independent advice and sales information.
Bank profits were privatised but losses have been socialised; thus, taxpayers are getting the worst possible deal. People on middle incomes, who are generally without the capacity to set up tax-avoidance schemes, can expect to pay more tax, yet their pension savings have shrunk. The bill for future public-sector pensions looks unaffordable. For the typical middle-income UK household in 2008 and into 2009, the financial options have narrowed, and, as a result, lifestyle options have narrowed too.
According to the authors consumer research, the view that property was the best investment for a pension was less common in 2008 than in 2006. Among the Bs, only one in five thought that property was the best investment for a pension, compared with more than half who thought this in 2006. Of the various socio-economic groups, the Bs were the most likely to have increased their savings in 2008, closely followed by the C1s. However, more people had reduced their savings in 2008 than had increased them. One person in eight said they had no savings at all — although the Bs were by far the least likely socio-economic group to be without savings. Confidence in online banking soared between 2002 and 2006 but advanced only slowly between 2006 and 2008. In 2008, more than half of the Bs and just under half of the C1s and C2s said they had full confidence in online banking. Nearly six in ten Bs used online banking services, well above the overall average of four in ten.
The published accounts of banks, insurers and other financial enterprises often fail to give investors, customers and analysts a clear understanding of the financial strengths and weaknesses of each business. There is no single global standard for financial reporting, which adds to the confusion. The structure of banking in the UK was dismantled in 2008. As at the start of May 2009, only two large groups, HSBC and Barclays, remained outside UK State control.
The individuals who make up Middle Britain have to decide whether to trust the State to look after them in the future, or whether to plan for a future in which welfare benefits will be lower than in 2009. There is an ethical issue of whether those who could but do not insure or save should, in the future, receive more from public funds than those who save as much as they can afford.
Falling property prices do not help existing mortgagees who plunge into negative equity, and no matter how cheap property becomes, unless solutions to negative equity are found, the property market will not operate efficiently.
The abandonment of private-sector defined-benefit pensions means that today's middle earners are likely to face financial hardship in retirement. The many Bs and C1s who work in the public sector are likely to be hit in coming years by a phasing out of defined-benefit public-sector pensions.
For Middle Britain, participation in financial services (apart from current accounts, savings, mortgages, loans and credit cards) is likely to be dominated by obligatory products such as motor insurance and home insurance for mortgagees, as well as by protection products such as life, income-protection, critical-illness and payment-protection insurances, and by compensation products, notably personal injury compensation.
Product samples
A sample for this product is available. Please Login/Register to download this sample.
Customers who bought this item also bought
Insurance Prospects Market Assessment 2008
Planning for Retirement Market Assessment 2008
Pensions Market Assessment 2007
Insurance Industry in the United Kingdom - Global Strategic Business Report
Financial Services Marketing to the Affluent Market Assessment 2009
Savings & Investments Market Assessment 2010
Financial Services Organisations on the Internet Market Assessment 2009
UK Life and Pensions Competitor Database 2011: Release 1
Pensions Market Assessment 2009
Commercial Dynamics in Financial Services Market Assessment 2010
|
|
|
|
