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Future Prosperity Panel
The full report
Big picture thinking: towards sustainable savings is an Aviva report commissioned by the Economist Intelligence Unit. The report is a culmination of a research programme begun in 2010 to explore the role of savings in financial prosperity.
Aviva convened nine world class thinkers from a range of disciplines to consider the challenge of future prosperity and come up with potential solutions. Their thought-provoking essays form the bulk of the report.
Offering an additional perspective, the Economist Intelligence Unit's (EIU) chief economist and editorial director, Robin Bew, outlined a number of important aspects concerned with savings and prosperity. The report also includes the results of research conducted by the EIU, which surveyed 815 global business leaders, showing the urgent need to foster an improved culture of savings.
Future Prosperity Panel foreword from Andrew Moss
When we decided to prompt a debate on future prosperity we knew we were taking on a big topic. One which touches on everything from the household budget to the big macro-economic challenges of our age.
This debate comes at a time when the world economy has weathered a series of major shocks that have shaken it to the core. Trust in the financial sector has suffered a major blow.
But the significant trends are still clear. In many developing markets, economic growth continues to accelerate, helping to deliver major improvements in living conditions for millions of people. Consider, for instance, that by 2030 an estimated two billion people will have joined the ranks of the global middle class, with the majority in emerging markets.
And people are living longer. Demographic shifts and improvements in healthcare mean that global life expectancy rates have increased by four years since 1990. Government liabilities are mushrooming as an elderly population is increasingly reliant for support on a smaller workforce.
But much of the evidence we see suggests people are not preparing enough for the future. Our 'Consumer Attitudes to Savings' research across 10 of our major markets finds that six in ten consumers are worried they won't have enough money when they retire to provide an adequate standard of living1.
Our 'Mind the Gap' report last year found that the gap between the income people hope to have in retirement and what they're actually saving totals €1.9 trillion a year across Europe. Four in 10 people near retirement age today are now planning to work beyond the normal retirement age in order to properly fund their retirement2.
For a business like ours, whose purpose is to provide its customers with prosperity and peace of mind, there is a role in helping understand these consumer needs and seeking new ways to meet them. Helping people manage their financial futures effectively requires understanding how, why and when they save. Few other issues have such profound global implications in the way they link macroeconomic and political debates, culture and psychology, local and global economic imbalances.
It is for this reason that we brought together nine prominent thinkers from a range of backgrounds to take part in our Future Prosperity Panel. It was a real pleasure to take part in the discussions and we're now proud to be publishing their essays which bring to bear their considerable experience in public policy, business and behavioural economics.
Contained in these, there is fresh thinking and a wide range of views. Indeed there is plenty of disagreement between them. But that's precisely the point. We all need this debate to happen now and hear from many voices and perspectives if we're to find answers to the challenge of our future prosperity. Therefore, perhaps it is no surprise that the thinkers identify roles for governments, individuals and industry.
As a global business, we are well positioned to build on some of the thinking here. Indeed, many things we are doing already. We support financial education in many countries, which is something many of the panellists raise. For example, our UK 'Paying for it' initiative provides a free educational resource in schools to bring the citizenship curriculum alive for 14 to 18 year olds. Aviva works in partnership with the Citizenship Foundation charity to deliver these practical lessons using our staff as volunteers.
And we make our products responsive to different needs in different parts of the world. In Sri Lanka, we have developed a micro-insurance product to extend the benefits of life insurance to tea plantation workers for the first time. In India we have developed a child plan product that allows parents to insure and invest to help secure their child's education. In the UK, we're developing our products and services to respond to the introduction of automatic enrolment for pensions, built on the behavioural habits and communication preferences of today's consumers.
We're also seeking transparency and choice so people get a good deal. For example, we're campaigning in the UK for the annuities market to be thrown wide open and companies forced to publish their rates so people can see where the best deals are to get the most for the money they've saved over their lifetime.
But I believe there is clearly far more to do to meet this challenge. At the heart of it is trying to provide what customers want and need. There are two broad areas covered by the thinkers in particular that I intend to focus on:
First, help people better understand the financial choices they need to make
I believe this is key. Whether it's the written information we send, the content that sits on our websites or the support they receive when they call us – we want it to be as clear and helpful to people as possible. Regulators can help by looking at the information they require companies to provide to customers to make sure it's specific and useful and not so burdensome that people cannot see the wood for the trees.
We are seeking to make our website a "go to" source of online guidance for people making their financial decisions – whether they choose to become Aviva customers or not. We will launch an innovative online tool that helps customers understand their current financial situation, the financial implications of life events such as starting a family or paying school fees, and shows them how they can realise their wants and dreams.
Next, we want to work in close partnership with governments around the world to help people get the information they need. This is why we have been campaigning for the introduction of annual pensions statements – bringing together people's forecasted retirement income from state, occupational and private pensions, all in one place. If people can see where they stand, they can better plan for the future.
Secondly, we must strive to change people's relationships to saving
Savings are about aspiration; we should talk more about the positive things people are saving for in their own lives. And I believe we can do more to kick start the savings habit in people from a young age and get people to keep the habit over a lifetime. In doing this, there might well be scope for making use of new approaches like the characteristics of gaming to make saving feel more interactive, compelling and – dare I say it – even fun.
In small tangible ways, we need to ask ourselves can we design the products that nudge people towards better providing for their own future prosperity?
There are exciting provocations in these essays that we will explore further in the coming months as we progress these priority areas. For us, this is not the end of the debate. It's the beginning. Taking on the big challenges in sustainable savings and providing for prosperity in the future is a task for everyone – no one single player can affect the necessary change. That's why we're looking to the industry and investors, our competitors and regulators, our customers and our staff, to join us in this big debate and help take things forward.
We hope this series of essays will provoke new ideas and actions, and that you enjoy reading them.
1 58% - Aviva consumer attitudes to savings survey February 2011
2 38% of people in the UK, the corresponding figure for all ten markets surveyed is 49% - Aviva consumer attitudes to savings survey February 2011.