The Financial Conduct Authority (FCA) has today published an Occasional Paper outlining the findings from a project that explored how the ageing population would impact the Financial Services industry.
The FCA launched the Ageing Population Project in February 2016 to explore how older people use financial services and products. The paper reviews the public policy implications of having a population which is getting older and the resulting impact on financial services. The document also includes actions which the FCA and industry could take to better support older people.
This publication is the first of a series of documents which the FCA will publish as part of our focus on consumers including an overarching strategy ‘Approach to Consumers’ which will be published later this autumn.
When reviewing the treatment of older people, the FCA found that there are risks that their financial services needs are not being fully met, which can result in exclusion, poor customer outcomes and potential harm. The issues appear to be driven by a range of interrelated causes. These include policies and controls that are not designed around consumer needs and unintended consequences of product and service design.
While older consumers are not necessarily vulnerable, they are more likely than other groups to experience vulnerability at some point (whether temporarily or permanently). This is particularly the case for those aged over 75. In line with the aims of the FCA’s Mission, this paper has focused on the issues where regulation and financial services firms can play a role and make a difference.
There is scope for financial services firms to do more. The FCA has set out some ideas for firms to consider in ways that fit their business models, such as looking at product and service design, customer support, and reviewing and adapting strategies.
The paper also explores a range of issues including older consumers’ engagement with retail banking, third party access and planning ahead, later life lending, and long term care.
These issues will require action from multiple parties to address over time. In many cases, solutions do not lie within the remit of any one party – including the FCA, or the regulated firms that it supervises.
The FCA has considered who might be best placed to address the gaps to improve financial markets for older people including other bodies who might be better placed to take forward topics outside the FCA’s remit. The FCA anticipates a further review in three to five years of how the financial services industry is adapting to meet the needs of older consumers.
Linda Woodall, Director of Life Insurance and Financial Advice at the FCA, said: “We hope that today’s paper will help drive further positive innovation in the interests of older consumers. Our findings highlight the extensive public policy challenge requiring action from firms, government, regulators and other parties to bring about improvements for older consumers who use financial services.”
Paul Broadhead, Head of Mortgage Policy at the BSA said “Building societies have been at the forefront of driving change in the provision of financial products for the needs of older consumers. Over the past couple of years, the number of societies offering mortgages that will extend into a borrower’s eighties and beyond has almost doubled.
“But this market will continue to grow dramatically and as we have repeatedly argued, other lenders will need to follow suit. The FCA cites research in its report that the share of borrowers aged 65+ is set to go from 1 in 6 currently to 1 in 4 by 2050. A third of babies born today can expect to celebrate their 100th birthday.”
“Earlier this year the BSA commissioned research from the International Longevity Centre which found that mortgage debt in the over 65s is set to almost double, to around £40bn by 2030. It is refreshing to see a regulator committed to looking long-term at the societal changes occurring with the way we buy our homes – and the ageing population more broadly. The regulator has already taken welcome steps in consulting on changes to Retirement – Interest only mortgages that is likely to help many borrowers.”
“We will continue to work with the FCA and other stakeholders such as the Treasury, Age UK, mortgage intermediaries and the equity release sector through the Retirement Cross-Industry Group which the BSA chairs twice a year.”