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Q1: Do you have any views on the ideas set out in this Discussion Paper and can you suggest areas of focus that would improve financial markets for older consumers?

The Discussion Paper is broad in scope, ranging over the challenge of financial planning for and during retirement, the need for continued access to products during later life and the very real issues around the impact of ageing on financial capability, financial inclusion and service design requirements. The scope of the FCA’s further planned investigations into the experience of older people, as set out at the beginning of the Discussion Paper, is also broadly defined, encompassing all those aged 55 and above.

We would argue, however, that the FCA’s forthcoming Strategy on the Ageing Population (and the research and consumer segmentation that will feed into it) should explicitly recognise that there are some specific and distinct issues that arise in later old age that may be lost if the focus remains simply on the whole age range from 55 and upwards. In particular we think the strategy needs to separate out and give specific focus to those aged 80 and over – the older old. This is a group that is not often addressed separately in data collection or research programmes. Instead the very elderly tend to be lumped together with all people over a certain age, often retirement age or some earlier cut off. Their numbers are also often under-represented in survey work due to the difficulty of capturing them in phone or online surveys, so that findings for the very elderly often cannot be disaggregated with any confidence after data have been collected.

Yet is it arguable that people in later old age face quite distinct issues from the “younger” old (those aged 55-80) who are often active, reasonably able-bodied and may not yet be facing significant issues or challenges. It is our view that unless the older old are studied separately their distinct characteristics and needs risk being swamped in a broad brush average account of people’s experience over several very different phases of life after the age of 55.

Some of the chapters in the Discussion Paper touch on the issues facing the older old – for instance, changes in cognitive function and consequent implications for how the financial sector interacts with the very elderly, as well as evidence of a decline in financial capability after a certain age, and the wider health and mobility challenges that affect some very elderly people. We think these challenges of later life now need to be drawn out within the FCA’s strategy – if necessary supported by further targeted research - so that the industry and the wider policy and regulatory environment specifically addresses what needs to be done to support the continued financial inclusion of those aged 80 and above.

The older old – those over 80 – are the fastest growing section of the population. Currently numbering just over 3 million, this will increase to 3.5 million by 2020 and a staggering 5 million by 2030, of whom 1 million will be over 90. As more people live longer and, crucially, aspire to live independently for longer, often at some remove from family support, it is imperative that all sectors, not just health and social care, are equipped to respond. The current rapid change in payments systems, the growth in online and mobile banking and the associated accelerated branch closure programme will, we believe, disproportionately impact on groups who find change difficult, who are not digitally connected and who suffer from multiple health and mobility challenges. Our own research with people aged 80 and over (as well as with those who provide informal care to them) suggests that they are particularly vulnerable to the risk of financial exclusion – that is, the inability, difficulty or reluctance to access mainstream financial services - for all of these reasons. We believe the FCA strategy should challenge the sector to recognise this and to put in place measures to future proof financial services provision for the very elderly, acknowledging that, with the expected rapid growth in the numbers of people in their 80s and 90s, this is a mainstream not a marginal issue.

Given the very significant role of family and other informal carers in supporting older people and the expected rise in the numbers of people living to much older ages, we would also argue that the FCA’s Strategy on the Ageing Population needs to address how the industry can support carers more effectively than it currently does. ONS data show that 38% of 75-84 year olds and 59% of those aged 85 and over are living alone. This is consistent with Age UK data that show that just 16% of people aged 85 and over live in nursing homes or residential facilities. Others in this age group may be living with an elderly partner or with other family members, if they have reached a greater level of dependency.  With so few in the age group living in care homes, the need for both formal and informal care, including support with day to day financial transactions, can only be expected to increase over time. It is already well-documented that elderly people are often disclosing PIN numbers and giving access to internet banking to those who provide care to them, not least because there are few viable alternatives. As Jane Vass from Age UK argues in the Discussion Paper, “Banks have begun to realise that they need a more sophisticated suite of solutions for carer banking, to fill the space between the debit card and a Lasting Power of Attorney”. We strongly support this position and recommend that the FCA Strategy explicitly addresses the issue of how the industry manages the carer relationship, and in the process supports and protects elderly people who are too often giving away more information or control than is appropriate or safe.

 

Q2: Are there specific products, services or distribution channels that are particularly associated with poor outcomes for older people?

Our research findings, based on survey work with the older old (summarised below), suggest that the rapid changes currently taking place in payment systems and the wider banking infrastructure, may become increasingly associated with poor outcomes for older people. The growth in online and mobile banking has led to an accelerated branch closure programme, and more recently, voices advocating a cashless economy. Indeed there are already an increasing number of services that do not accept notes and coins – London buses, some parking meters and motorway tolls to name a few.

Current changes to payments systems risk leaving behind vulnerable groups, especially those who are unable or unwilling to adapt to new technologies. Our research found that use of the internet is very low among those aged 80 plus, smart phones take up is minimal and many elderly people are fearful of technology and worried about privacy, security and fraud even when using ATMs as well as finding many devices daunting and difficult to use.

If the elderly become excluded by technology and if the erosion of the physical infrastructure for accessing banking services continues, then outcomes for this age group will deteriorate. This will have knock on effects for society as a whole if older people are unable to continue to manage their day to day financial transactions at least with some degree of independence. We found that the very elderly value the immediacy, familiarity and tangibility of cash. Indeed for many cash is said to be a crucial tool for budgeting and keeping track of money. They also value human interaction and the social contact and reassurance that it provides, and as a result many do not want to switch to technology-enabled transactions. They need and want to continue to have a physical not a virtual means of accessing and managing their money, and to be able to so in a environment in which they feel safe - for instance when asked about their use of ATMs, only one-fifth of the older people we interviewed said they would use an ATM outside in the street, where they feel exposed and vulnerable.

It might well be argued that this will of course change as future generations enter these age groups, having acquired skills in internet and mobile banking earlier in life, and with a lifelong familiarity with ATMs, contactless and cashback technology. However, this may not provide a solution for many decades to come with many of those coming up to these age groups saying they don’t want to have, can’t afford or don’t know how to use the internet, and more generally remaining wary of unfamiliar technologies. It is salutary to consider that the one million people who will be over the age of ninety in 2030 are already at least 75. Data from the English Longitudinal Study of Ageing analysing the age groups who will shortly feed into the cohorts of the very elderly show that in 2012/13 a little over half of 70-74 year olds use the internet/email, falling to roughly two-fifths of 75-79 year olds and dipping much further for those aged 80 and over. The percentage of those going online who actually use it for banking purposes will be significantly below these figures. We submit therefore that the industry cannot rely on increased take up of technology as a solution any time soon.

Moreover it is vitally important to recognise that for future cohorts the barriers they will face in old age go well beyond their learned ability to use and adapt to changes in technology. Older people make mistakes, get more easily confused about their money and are known to be vulnerable to online fraud or error, as argued in your DP. They suffer from sensory and cognitive decline, often combined with illness or frailty. They may have macular degeneration, be semi-paralysed by a stroke or suffering the side effects of chemotherapy. And that is without considering whether continued rapid changes in technological interfaces will be something that they are able to deal with as cognitive faculties decline. Any of these things may make them simply unable to operate effectively within an online or technology-enabled system, however good they were at doing it in the past. Indeed trying to use technology in the face of these challenges may even expose some elderly people to greater risk from error or fraud than sticking with conventional transactions methods. Although there is of course huge variability in the capabilities and constraints that older people face, the industry must prepare for the fact that older people’s needs from the banking sector in carrying out day to day financial transactions may always differ from the needs of younger age groups due to the nature of the ageing process itself.

For information only and not for quotation without permission - further detail on The Finance Foundation’s research on the over 80s:

The Finance Foundation has recently completed an in-depth study of people aged 80 and over, looking at how they manage their day to day finances – paying bills, taking out cash and keeping track of money – and in particular exploring the extent of problems or barriers encountered, whether this be due to physical and sensory impairment, poor capability, exclusion from mobile and digital access or more general vulnerability to poor conduct or fraud.

The research was carried out by Opinium in October and November 2015 and will be published as a Finance Foundation research report in mid 2016. It combined qualitative group discussions with collection of quantitative data via face to face interviews with 175 people aged 80 and over around the country. Uniquely the research also included interview evidence and an online survey of 250 informal carers – generally family members or friends – who give support to elderly people in managing their finances, providing a further perspective on the issues faced by the very elderly. As a result we were able to explore a wide spectrum of experiences amongst the over 80s from those who are still independently managing their day to day finances right through to those who are increasingly challenged by illness or frailty such that they rely more and more on family support.

Some of our key findings are:

Interview Survey of those aged 80 and over

  • Elderly people use a variety of payment methods – cards when paying in shops, direct debits for bills – but they are also highly dependent on cash for day to day payments and for re-imbursing people who do work/shopping for them;
  • Cash is also seen as key to budgeting and keeping track of money by around half of those responding, with a regular withdrawal of a specific amount of cash helping them do this; by contrast nearly two thirds saw no need to use credit cards or were positively opposed to them;
  • Over a third never use ATMs or avoid them if they can and the majority of those using them are only prepared to do so inside banks, with only one in five using them in the street. Concerns about security, theft, fraud and physical barriers in reading screens and using buttons were frequently cited;
  • For the 74% who take money out over the counter worries about privacy when counting money, physical issues such as hearing or standing in queues and issues over staff attitudes to and training in supporting elderly people as well as the impact of branch closures were all frequently raised as issues;
  • Use of the internet for financial transactions is very low among this age group – 13% - with online shopping the most frequent use. Reasons for non-use included not having/not needing the internet (75%) and a range of hypothetical worries over fraud, making mistakes and an overriding preference for interacting with people face to face.

Online survey of informal carers who support an elderly person (80+) with day to day finances

  • Nearly all the elderly people being helped had some health challenge, but of most interest was the extent of overlap – 41% had two out of sensory, cognitive or mobility challenges and 21% were experiencing all three types of issue – this rose to 31% of those aged 85 and over and 41% of those aged 90 and over. This is despite the fact that 76% of those being supported by an informal carer still lived in their own house and 59% lived on their own;
  • Carers help with a range of both routine and essential tasks and disclosure of PINs and being given access to online banking is common. Over a third of carers go with the elderly person they help when they need to draw out money at the bank or ATM. Alongside this sort of support, helping with buying things on the internet, searching for better deals with utilities or insurance or making the most of savings is very common. Some tasks that carers undertake suggest a very significant level of dependency between the carer and the elderly person, also indicated by the fact that in general they occur more often where the elderly person is aged 85 or over. This includes the 29% who go to get cash for the elderly person using their card, the 30% who help them keep track of their money using their statements and receipts, the 16% who access their account via the internet so that they can set up payments, the 16% who help them write cheques which they then sign, the 22% who help them count out their money or put in their PIN when shopping and the 22% who check what they are paying to make sure there is no confusion.
  • Loss of physical capacity, bereavement and cognitive issues (confusion/ anxiety) were the main reasons for carers having become more involved with giving help on financial matters. Nearly a fifth of carers said the elderly person they helped did not understand their income and outgoings well enough to budget properly, a third had difficulty comparing products such as utility tariffs or ISAs, 17% had got into difficulty as a result of being caught out by small print while 15% had been persuaded to buy things they didn’t want and 8% had been subject to actual fraud or scams.

Our research also asked elderly people and their carers about what they would like banks and other institutions to do to make things easier for them:

  • The four issues that stood out for elderly people were, in order of frequency: a huge preference for being able to carry out financial matters face to face and not use machines (46%), a concern about branch closures and there being enough local branches (38%), a strong requirement for greater privacy and less open plan space in banks so that they can count out their money or carry out transactions without being seen or overheard  (34%) and a desire for more age-appropriate machines with bigger buttons/bigger screens and greater privacy (29%) - located inside banks or post offices given their disinclination to use external ATMs.
  • Less frequently mentioned but still significant were issues relating to staff training and behaviour – 18% wanting staff to be better versed in how to relate to older people and explain things in the right way and at the right pace - including 17% stating that where staff are demonstrating how to use machines they need to teach this properly rather than just doing it themselves and expecting it to be picked up. Other service related improvements that elderly people highlighted included communications from banks – 20% thinking these should be improved - addressing issues around how elderly people access telephone banking services – 18% - and a home banking or mobile banking service for who those who can’t get out – 19%.
  • Carers had a similarly strong focus to the elderly interview sample on the need for elderly people to be able to speak face to face to people they trust – 36% mentioning this in their top three improvements. They placed rather more emphasis than the elderly on the need for effective staff training in dealing with older people – 31% citing this as important. Also much more highly ranked by carers than by the interview sample of elderly people were the need for letters and communications that are easy to understand/do not cause alarm, phone services that support rather than hinder elderly people and better provision for family members or carers to access money or support in managing finances without taking full control – all of these being mentioned by around a third of respondents.
  • When carers were asked what would help them the most as carers (as opposed to what would help the elderly person they were helping) the issues most frequently mentioned were: being confident in safeguards to protect elderly people from fraud and mis-selling (48%), being confident that staff in banks and other organisations fully understand and address the needs of the elderly person and make allowances for them as appropriate (37%), simpler processes for elderly people to nominate someone to act for them over the phone (33%) and simpler processes (31%) and more dedicated expertise in banks (28%) at the point at which family members or carers need to start taking greater control. These responses clearly reveal the twin concerns carers have around the potential vulnerability of elderly people to mistakes and - at the extreme - abusive manipulation while still managing their finances, as well as the barriers that carers perceive that they themselves face at the point at which they need to take greater control.

Q3: What is the role of industry and other stakeholders (collectively as a market or at an individual firm level) in addressing the issues identified?

The Finance Foundation will be developing/discussing possible policy responses as it prepares to publish its research on how the older old can best be supported to stay in control of their day to day finances. As the previous section has shown, there are many issues where improvements are needed to support continued financial inclusion, particularly for the very elderly and our survey work with people aged 80 and over and those who care for them also provides many pointers to changes that would help with this. Much of the response will be required from within the industry, but may need regulatory or other provision to overcome barriers.

Our recommendations are likely to include actions under the following headings:

  • Legal and regulatory framework
  • Age discrimination exemption for financial services should be re-visited and challenged
  • Action to promote age proofing and establish champions for financial inclusion – at government, industry-wide and individual institutional level.  At each level, decisions that are made about service provision and the future of banking and payments systems, including the future of cash itself, should be taken with full consideration of the risks to vulnerable groups such as the very elderly – this must be part of the future proofing of system design. Consideration should be given to whether this needs to be backed up at Ministerial level with a lead Minister for financial inclusion and champions in other departments
  • Full discussion of what role the FCA might take in supporting age inclusive services, promoting financial inclusion and requiring a wider interpretation of duty of care by financial services firms, potentially via a new statutory duty to promote financial inclusion.
  • Incentivise age appropriate technology modifications from ATMs to smartphones – as Jane Voss remarks in the DP, “[a]ge-friendly design...should be built in as the default”.  Should include dedicated ATMs suitable for the elderly, more appropriate website design, rethinking security screening and use of PIN and password access which often present difficulties for the elderly. This must be combined with better solutions for those who can no longer get out easily - phone banking security must be made easier for the elderly to navigate, and not require detailed recall, for instance, of recent transactions that have not yet appeared on paper statements or recalling the position of random digits in a password.  Developments in biomedical security clearly offer huge potential here, but re-design of security screening/biometric tools must be done with age inclusivity at the forefront.
  • Age-appropriate design and practice
  • Similarly, service delivery must be re-designed. Elderly people have told us that they need private areas to sit down in banks so that they can count their money before putting it away or if necessary discuss their affairs. Where they use other non-bank counter services such as the Post Office, provision for the elderly to carry out financial transactions should include dedicated queues and perhaps facilities to sit and wait if they are unable to queue for long.
    • Training for staff with a public facing role in how to interact effectively with older age groups. This should include being mindful of their health challenges and other vulnerabilities, their susceptibility to fraud and scams and their need for people who understand and can deal sympathetically with their issues. Banks should also reconsider how they apply rules on missed payments or overdrafts when dealing with the elderly – for instance if they generally manage their account properly but become unexpectedly ill or make a mistake punitive responses and charges should be avoided. Financial institutions also need to be more aware of the impact of their communications – we heard frequently that elderly people are frightened or confused by many of the letters that come out to them.
  • Provision for delegation and support to families
    • Better provision for limited delegation without loss of control – somewhere between handing over debit card and Lasting Power of Attorney. Elderly people should be able to delegate some control over cash withdrawal to trusted family or carers without having to disclose their PIN or cede third party or joint account control, which compromises their independence and may expose them to risk. A potential solution would be to give carers access to second loadable cards with specified limits, as is already available for Post Office Current Accounts (POCA). Similarly systems for safely delegating phone banking to trusted family/friends need to be significantly improved.
  • Better signposting for relatives and streamlined processes for taking control when that becomes necessary. Carers have flagged up gaps in how banks support families in understanding the issues and processes when it comes to them needing to take greater control. Easily accessible specialist support services and signposting for relatives must be provided by banks as the elderly population, including the expected phenomenal growth in the over 90s, swells. Processes also urgently need to be simplified and co-ordinated, for instance introducing a single point of registration when activating a Lasting Power of Attorney, rather than the burden of requiring relatives to register with every institution where their relative has an account at precisely the point at which other matters are escalating for them.
  • Re-creating the infrastructure to support inclusion
  • Perhaps most important of all, the infrastructure whereby elderly people (and others) are able to continue to access a regular supply of cash, check their spending and pay bills in ways in which they can manage, needs to be protected and if necessary re-designed.  Continued action is required to mitigate the impact of branch closures across the country – need to continue to encourage the Post Office to offer appropriately designed and accessible counter banking services, and explore other solutions such as branch sharing arrangements between banks or greater involvement of credit unions or similar.
    • Other more innovative solutions may be required for those with mobility challenges or in isolated communities – e.g. local one-stop shops for banking that could be set up within an existing day centre or similar for a few hours each week with transport provided for those who need it. This would ensure that all elderly people have a viable and safe means of withdrawing cash and getting help with other transactional issues such as setting up direct debits, checking statements and balances and looking for better value products for savings, insurance etc.
  • There should be consideration of a potential levy to fund age-inclusive infrastructure provision in the light of the free rider and cost considerations that mitigate against the industry providing it voluntarily. Alternatively, or potentially alongside an industry levy, funding may be needed from public money to protect the payments infrastructure. This will need to be allocated and justified on a preventative rationale – by considering the greater costs of not providing an effective banking and payments service to the elderly. Where elderly people’s capabilities and circumstances risk excluding them from continuing to carry out daily financial transactions in a technology-focused system, then just as with other daily functions, they will become fully dependent if they are not enabled to overcome the barriers. That is the more costly option.

More detailed research on how best to future proof financial services provision

In addition to the policy recommendations that we will be developing, as outlined above, we think there is also a case for the FCA’s strategy to flag up the need for more detailed research into the needs of the ageing population and how these can best be met by policy to support inclusion.

It has been argued earlier in this submission that there is a need to focus specifically on the needs of the older old – those aged 80 and over – alongside consideration of the needs of a more generally defined cohort of older people. The risk is that if the age group of interest is defined too broadly it may be too diverse to enable the challenges of being very elderly to be understood and addressed – they will simply get masked in the overall analysis. There should, therefore, be greater encouragement and/or direct commissioning of research that enables this granularity of experience among different segments of the elderly population, and especially the older old, to be examined.

Our submission has also discussed the issue of younger cohorts progressing through to very old age and the question of whether their capabilities and life experience mean they will be different from today’s very elderly or whether there are features of being old that will always require different design and provision from financial services. We think there is a strong case for researching this issue in more detail. An obvious starting point would be to look at the post war baby boomer cohorts – those born between say 1945 and 1950 who are currently in their late 60s and early 70s. As has been the case throughout their lives, their sheer numbers make them a really important group to understand and provide for – both from a government and an industry perspective. Researching their experiences in using and interacting with financial services over the next few years in order to better understand how to meet their needs as they age - and by extension the needs of upcoming cohorts - would be extremely fruitful.

It would, for instance, enable analysis of how those who experienced the information technology revolution during their working lives (as opposed to post retirement) might be different as they age, considering also how disability and frailty in these cohorts progresses and the extent to which it affects their capacity to continue to operate and adapt to technology. It would also allow investigation of other issues such as whether financial capability is always lower for older age groups (as the Money Advice Service has found is currently the case) or whether cohorts with better starting levels of general education, numeracy and financial literacy, including greater exposure to more complex financial concepts and tools during their working lives, fare better during their later years than current generations of the very elderly appear to.

Q4: Do you have any evidence of effective approaches to meeting the needs of older people that you have already developed and tested, or that you have observed in other markets (UK and international)?

We do not have any specific evidence of this sort from our work.

We are aware, however, that Age UK will shortly be publishing case studies of actions or initiatives that banks and other financial institutions have taken which have helped in meeting the needs of older people, and no doubt there will lessons to be drawn from that.

We also welcome the comments and insights from Paul Broadhead, Head of Mortgage Policy at The Building Societies Association, presented in the FCA Discussion Paper you have published, in which he recommends that firms should consider having someone at a senior management level who is a strong advocate for the needs of older customers. He states that this ‘Older Persons Champion’ should think about whether every part of the business is geared to serve older customers, asking questions such as: Are there appropriate communication channels in place? Are staff trained in how to interact with customers with differing needs in later life? Are they aware of the existence of Lasting Powers of Attorney? Are product portfolios appropriate in meeting the needs of older customers?

This is exactly the sort of age proofing advocacy that we would like to see embedded and it sits well alongside his description of other initiatives that he is aware of in the sector such as:

  • Some members providing home visits to those that have difficulty getting out of their homes;
  • One member that provides a drive-through branch, because many of their customers are elderly, cannot walk very far, but are car drivers.
  • Some branches moving to lower counters, often with stools or seats, so that customers that cannot walk very far can sit down while they are transacting because it makes it more comfortable, and they can maintain their independence.

These simple, practical and innovative approaches would form a good starting point for a more extensive remodelling of how services are provided to the elderly across the financial sector.

 

Q5: Do you have any evidence of regulatory barriers that prevent effective markets for older people?

The preceding sections have identified many factors that make older people - especially the very elderly - increasingly susceptible to financial exclusion, particularly as new technologies continue to develop and supplant traditional banking and payments systems. We do not have specific evidence of regulatory barriers preventing effective markets for older people – rather that there are potential new regulatory safeguards that are needed to ensure markets work effectively and inclusively for them.