Helping people save for retirement is a growth opportunity for today’s insurers – but only if we protect the future our customers will retire into.
Across the world, populations are ageing. Standards of living are better and medical science improves constantly. The global population of people aged 80+ is projected to grow three times from 137m in 2017 to 425m in 2050 1.
This is positive. But it creates challenge and promotes societal change.
Take ‘cliff-edge’ retirement. Or in other words, working until a set date. People approaching retirement may be increasingly likely to flex work around caring responsibilities go part-time or have several careers each with their own retirement date.
Ageing societies create demand for flexible, private provision for retirement.
The three-stage ‘education-work-retirement’ model is changing. Consumers are grappling with new questions. How will I afford a longer retirement? What will I do with my time? How will I stay healthy if I live longer and work less?
Workers of the past may have relied entirely on an annuity to maintain their quality of life after the cliff-edge. Tomorrow’s retiree may look to stagger their retirement income through equity release, drawdown pensions and long-term savings products.
We want all our customers to make informed decisions about how much, how long and where to save and invest.
We helped 33-year-old Laura, who wanted to understand how to achieve her goal of retiring early and still living as comfortably as she does now.
This in turn presents a long-term growth opportunity for insurers. We’re demonstrating our capability to respond:
- Increased new business volumes in our Europe and Asia Life businesses added value in 2019, despite a challenging environment of low government bond yields in some European markets.
- 2019 saw £7.5 billion of net in-flows in savings and retirement (up from £6.8bn in 2018) and £2.3 billion of third-party net in-flows in Aviva Investors.
- In the UK, annuities and equity release new business were up 29% for Aviva in 2019. And we announced significant enhancements to our lifetime mortgage proposition, making this increasingly popular form of funding in later life more flexible for all eligible customers.
- Also in the UK, in February 2020 we called upon the state to increase state pension flexibility in line with the changing retirement environment.
Our customers want to retire into a safe world
That’s why we must keep investing in sustainable growth.
Climate change and the growing awareness of its impact may bring new risks. For example:
- Transitioning to a low-carbon economy will need significant investment and carries risk if changes are made unsustainably or too suddenly
- The global population is projected to reach 8.6bn by 2030 2, with global energy demand expected to grow by more than 25% by 2040 3
- Globally, ambient air pollution related deaths have increased from 1.7 million in 1990 to 2.9 million in 2017 4
To help combat those risks, people are growing more conscientious of investing responsibly.
We’re leading the way in environmental, social and governance (ESG) considerations - whether actively investing our customers’ savings, or managing their retirement income sustainably.
- In the UK in 2019, we maintained our number one position in the workplace pension market.
- In July 2019, we launched the Stewardship lifestyle strategy, a workplace pension default investment strategy based on the Stewardship funds, which we launched in the 1980s.
- In September 2019, we added the Stewardship funds to our adviser platform.
Sustainability measures are no longer optional, and we recognise the role of big business as a catalyst for change.
We recognise the role of big businesses as a catalyst for change on the Paris agreement goals, to keep ‘heating well below 2°C above pre-industrial levels’ and pursue efforts to limit temperature increase even further to 1.5°C.
In November 2019, we signed up to the UN Net Zero Asset Owners Alliance. This commitment brings together the world’s biggest pension funds and insurers to commit to net zero emissions in their investment portfolios by 2050.
As retirement needs change, it may not be a traditional insurer or retirement provider that consumers place their trust in. Whoever creates the solutions to these issues will need to help create the sustainable world we currently don’t have.
We’re ‘with you today, for a better tomorrow’ because the future depends on the actions we all take today.
Help with financial planning for people in the middle of their lives
1 United Nations, Department of Economic and Social Affairs, Population Division (2017). World population Ageing 2017 – Highlights (ST/ESA/SER.A/397)
Original citation: “Globally, the number of persons aged 80 years or over is projected to increase more than threefold between 2017 and 2050, rising from 137 million to 425 million”
(p 5 of the PDF)
2 United Nations Office for the Coordination of Humanitarian Affairs, World Humanitarian Data and Trends 2017 Global Landscape
Original Citation: “The global population is projected to increase by more than 1 billion people over the next 13 years, reaching 8.6 billion in 2030”
(see p2, in the Population box)
3 International Energy Agency, World Energy Outlook 2018 Press Release, 13 November 2018
Original Citation: “Under current and planned policies, modeled in the New Policies Scenario, energy demand is set to grow by more than 25% to 2040, requiring more than $2 trillion a year of investment in new energy supply.”
4 Global burden of Disease Study 2017. Institute for Health Metrics and Evaluation (IHME). Seattle, WA.
(See attached spreadsheet for ambient air pollution deaths figures)