Money Management - Q3 2020

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Q3 / 2020

Who should savers really trust?

The answer could be simply: themselves and each other!”

Martin White UK Shareholders Association

Online “When you add that 51% of people focus only on their current needs and wants, you get a fair picture of the difficulties and potential shortfalls we could all face in the future.”

“Scams directly impact the levels of public trust that people have in the financial services industry.”

Lizzy Holliday Head of DC, Master Trusts & Lifetime Savings, PLSA

Liz Field CEO, Personal Investment Management & Financial Advice Association

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IN THIS ISSUE

Retirement Living Standards help savers picture the future

“It’s an unfortunate fact of corporate life in the UK that many big businesses fail to pay suppliers on time.”

Martin McTague Policy and Advocacy Chairman, Federation of Small Businesses

05 “The future of finance is decentralised.”

Stani Kulechov Founder & CEO, Aave

06 “Somehow, the corporate world has got itself into a mess, where unjustifiable individual rewards often combine with a short-term focus that is harmful to society as a whole.”

Martin White UK Shareholders Association

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A survey carried out by the Pensions and Lifetime Savings Association (PLSA) back In 2018 found that only 23% of people are confident they know how much they need to save for retirement.

W WRITTEN BY Lizzy Holliday Head of DC, Master Trusts & Lifetime Savings, PLSA

hen you add that 51% of people focus only on their current needs and wants, you get a fair picture of the difficulties and potential shortfalls we could all face in the future.

Pensions have rarely been an exciting dinner table talking point. That said, it is vital we increase our efforts as a nation to get to grips with our retirement plans.

Our surveys in 2018 found that 73% of participants believed that targets would make it easier to plan for retirement. So we set about creating PLSA’s Retirement Living Standards.

What are Retirement Living Standards?

The standards aim to help people to picture their future and to provide a robust yet simple rule of thumb.

The Standards are set at three specific levels – minimum, moderate and comfortable – to simplify a spectrum of possibilities.

Developed in partnership with independent researchers at Loughborough University, each level features a detailed basket of common goods and services – including household bills and maintenance, clothing, transport – to make future lifestyles tangible now.

The Standards also provide the specific annual costs of these baskets – to serve as a general benchmark or rule of thumb, as well as a starting point for more personalised planning and goal setting. These can be abbreviated as 10k-20k-30k for a single person, or 15k-30K-£45K for a couple.

The standards aim to help people to picture their future and to provide a robust yet simple rule of thumb.

Is now the right time to be thinking about pension savings?

For some, at the moment, saving and planning might be particularly challenging. COVID-19 has not impacted everyone in the same way – some have more disposable income, while others are unfortunately in more difficult positions.

The Retirement Living Standards can provide a practical benchmark for all.

Picturing and quantifying the outcome you want from your pension saving is key to informing financial decisions you need to make now. Plans might need adjusting, but keep your end goal in sight, and understand the impacts on that goal.

What are the future plans for the Standards?

To ensure the Standards become a nationally used frame of reference, it is vital that pension schemes, advisers, consumer bodies and government bodies all make use of the standards.

Schemes are already using the Standards in their saver communications, making them available to more than 8.5 million people across the UK, as well as developing tools to make them more personal to their savers.

We will be updating the Standards each year, and developing additional support for adopters – including sharing case studies, further ‘scenarios’ for specific scheme membership profiles, and additional rules of thumb.

We are committed to encouraging further adoption of the Standards in a bid to reach even more savers to help them picture their future.

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Paid for by Standard life

With millions of savers in the UK looking towards their pension (thanks to auto-enrolment), the finance industry is keenly aware that one size doesn’t fit all.”

Lots to learn: how data is transforming workplace pensions Since COVID-19 first affected our lives, people are heading online more and more.

Standard Life has enhanced its member communication to meet these digital needs, with member data allowing personalised communications.

A INTERVIEW WITH

Donna Walsh Head of Proposition Deployment, Standard Life WRITTEN BY

Gina Clarke

pp usage has seen an increasing trend, and the need to communicate digitally has only accelerated that growth. Standard Life has reported a 72% increase year on year in app usage (as of June 2020). Indeed, thanks in part to new features released over the last few months, its usage has now overtaken that of the pension provider’s online member dashboard.

Many of these members now using the app have come through to Standard Life through a workplace pension, where financial education has always been crucial.

When restrictions from COVID-19 set in, as well as priority access for keyworkers and those affected, the Standard Life team enhanced its tailored digital communication methods with messaging to members based on factors such as age, needs and member experience to date.

This easily digestible information has been invaluable, whether it’s a ‘Stop and Think’ method to inform around market volatility or pension scams; or relevant information and guidance to help members based on their life stage. There is also a new COVID-19 hub, which answers those important questions and also outlines when and where to seek advice.

Tailoring communications for individual members For Donna Walsh, Head of Proposition Deployment at Standard Life, staying

relevant means that the company has to understand member needs. She says: “To do this, we have segmented members into 14 different groups, each with different needs.

“This new programme has enhanced our dynamic, automated communication system, which has transformed the way members interact with us. From encouraging young families to save, to early birthday information packs ahead of key milestones, no matter the ‘member journey’, we can offer tailored messaging that keeps our information relevant.”

The data is based on insights from member engagement levels and surveys, likely financial goals, functional needs and emotional needs.

Standard Life’s new client analytics tool incorporates this data, allowing trustees and clients to understand their workforce better, with an online self-serve platform enabling analysis of member segmentation set against the initial 14 models that Standard Life has created.

Donna adds: “With millions of savers in the UK looking towards their pension (thanks to auto-enrolment), the finance industry is keenly aware that one size doesn’t fit all. Many members will not be as pro-active about their retirement as might be required, so engagement is key.

“Once a member is engaged and logs into their member dashboard, app or calls us, we endeavour to provide them

with information and guidance to empower them to take action.”

One example is the in-scheme drawdown solution for Master Trust, where Standard Life have incorporated guided investment journeys in line with the FCA’s Investment Pathways. Donna adds: “This is to help guide and support members to make an investment decision based on how they intend to drawdown their retirement savings.”

Financial education to help members understand how to maximise their workplace savings Other steps to offer members financial education include industry initiatives, such as the PLSA Retirement Living Standards. Some are already incorporated into member journeys, such as the ‘How much do you need in retirement?’ tool, which already uses the minimum living standard. Standard Life will be incorporating these in member annual benefit statements and their new retirement income tool soon.

Alongside additional support and webinars, video animations have helped members to understand how their pension works, explain investments as well as retirement options and tools.

And, later this year, Standard Life will launch personalised videos on member dashboards, with real time pension data, taking member relevance one step further.

If you’d like to understand more on how Standard Life can help you or find out more about workplace pensions, please visit standardlife workplace.co.uk

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Manage your money and plan for 5 ways to make your retirement from your phone them pay

The use of money management apps has skyrocketed in the UK over the last few months, with more than half of the population (54%) now using them regularly.

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t’s an unfortunate fact of corporate life in the UK that many big businesses fail to pay suppliers on time. More than £23 billion was owed to firms in late payment in 2019 – up 80% on the preceding year. So how can you protect yourself from the debilitating scourge of late payment?

WRITTEN BY Innovate Finance

1

Credit check clients The Government requires the biggest businesses to report on their payment practices, so have a look at how potential customers perform on the invoice processing front. You can also employ Experian to conduct credit checks for a small fee.

2

Be professional Lead by example. Be crystal clear about what you expect in terms of payment times and terms at the outset of your relationship with a new client.

Make sure your invoices are issued swiftly, look professional, are easy to read and clearly set out how and when payment should be made.

3

Employ tech Take the headache out of chasing payments by setting up automated reminders that invoices are due. Online accounting platforms can usually facilitate this, and the rise of open banking means more tools will become available over the coming years.

4

Money management The impact of the current pandemic has led to an increase in the number of people who are under financial

Consider alternative finance If you’re happy to free up the cash you’re owed immediately for a fee, why not consider invoice finance?

It usually takes two forms: selling your invoices to lenders who then chase the cash themselves, or using invoices as collateral for short-term lending. FSB Funding can put you in touch with a range of providers.

5

Ask for help Don’t suffer in silence. FSB Debt Recovery can provide targeted support where late payments are concerned and we’d encourage you to share examples of bad practice with the Small Business Commissioner.

Through working together, we can bring our late payment crisis to an end.

©Brothers91

WRITTEN BY

Martin McTague Policy and Advocacy Chairman, Federation of Small Businesses

W

e are in times of accelerated fintech adoption. According to a recent article by Altfi. com, the use of money management apps has skyrocketed in the UK over the last few months, with more than half of the population (54%) now using them regularly. Apps like Wealthify, Moneybox and Yolt have all joined the wider rise of fintech that has seen the use of technology to help in the management of money and savings.

There is a wide range of companies out there willing to aid you in managing your money better.

Bux, YieldStreet (out of the US), Parallel Markets, Freetrade, Revolut, Robinhood and Nutmeg; these apps aim to simplify investing, rebuild trust in financial services through transparency and remove perceived barriers to investing in stocks, ISAs, funds and even cryptocurrencies.

Now, with the help of businesses like Oval money, individuals are just one click away from monitoring their spending, saving, and budgeting habits.

Vestpod, a finalist of the 2018 Women in Finance Awards as “Disruptor of the Year” stands to empower women through Financial education. They have broken the taboo around “women and money”.

stress. Fintechs like Dozens (a current account with saving tools and safer investments, all built on a socially responsible business model) have come into the financial framework and made money management easier and faster. Others such as Revolut and goHenry, have created a world where children as young as seven can learn to spend and save in a safe setting.

Children can now have greater financial awareness that is not solely based on their parents’ financial literacy. Businesses like PensionBee allow pensions to be easily managed online, almost like a bank account.

Fintech partnerships and accelerated adoption Partnerships between fintechs and major financial players like JPMorgan Chase and Plaid, Tandem Bank and Stripe, and Barclays and Scalable Capital enhance the speed of fintech adoption. In addition, open banking platform, Money Dashboard, allows users to connect their current accounts, savings accounts and credit cards from high street banks to make it easier to manage personal finances.

Janine Hirt, COO of Innovate Finance, says: “Fintech can cater to a much wider segment of the population, so we’re seeing how it is really creating the democratisation of finance, in a way.”

Sooner or later, fintech will completely shape the world in terms of how people’s finances are managed, whether it’s saving or investing.

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Paid for by AAVE

The future of finance is decentralised

John deposits his digital assets in Aave and starts earning instantly

London-based fintech company, Aave, is building a decentralised financial ecosystem on the ethereum blockchain that is transparent, open, and trustless.

D

WRITTEN BY Stani Kulechov Founder & CEO, Aave

ecentralised finance (DeFi for short) uses open-source networks to create financial products and services without involving centralised institutions. Like traditional finance, DeFi allows people to earn interest on deposits and borrow assets, but DeFi doesn’t require any middlemen.

DeFi provides an opportunity to enable services that have a near zero cost of entry. Decentralisation means that the records are kept via a network of smart contracts on the blockchain across a vast number of computers, making the ecosystem extremely resistant to failure at a single point.

The Aave Protocol for DeFi Headquartered in Shoreditch – London – a global hotspot for fintech – Aave Protocol is a completely decentralised, open-source, and non-custodial money market protocol. Users can purchase and deposit cryptocurrency assets into

DeFi allows people to earn interest on deposits and borrow assets, but DeFi doesn’t require any middlemen. the protocol and earn interest on their deposits as the underlying assets are lent to borrowers.

DeFi is permission-less, so the protocol is accessible to everyone and does not discriminate based on financial background. The whole system is trustless, and lenders and borrowers can be complete strangers. Historically, rates in DeFi have been higher than in a traditional bank account where interest rates are low in the current economy.

Reference https://uk.reuters.com/article/uk-crypto-currencies-lending-insight/boom-or-bust-welcome-to-the-freewheelingworld-of-crypto-lending-idUKKBN25M0GQ

Pensions have rarely been an exciting dinner table talking point. That said, it is vital we increase our efforts as a nation to get to grips with our retirement plans. ~ Lizzy Holliday Head of DC, Master Trusts & Lifetime Savings, PLSA

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Responsible investing – what does it mean in 2020?

Financial fraud & protecting clients’ wellbeing

O

“To tackle vested interests, we must empower savers”. Face it – capitalism is in crisis.

Somehow, the corporate world has got itself into a mess, where unjustifiable individual rewards often combine with a short-term focus that is harmful to society as a whole.

ur wellbeing has been severely tested over recent months.

COVID-19, unprecedented market volatility, a deep recession and resultant spike in unemployment are all contributing to an unease affecting tens of millions of people. This has been magnified by a significant upturn in fraud, targeting those most vulnerable.

“75% of all fraud crimes reported are cyber-enabled – it’s now a lot easier than robbing a bank and the rewards are far greater,” says the Commissioner of the City of London Police, at the Personal Investment and Financial Advice Association (PIMFA) financial crime conference this year. Inevitably, as the number of vulnerable people increases through the pandemic, this type of crime is being reported more and more frequently. This is why the global business spend on cybersecurity is expected to double this year, to over £130bn.

WRITTEN BY

Martin White UK Shareholders’ Association (UKSA)1

Society needs companies to:

• Meet customer needs efficiently; • Look to long-term success as much as today’s profits – the signs that really matter are not easily measured, and not always understood either; • Regard employee satisfaction, personal development and appropriate levels of empowerment as an important operating principle.

The most common scams we face Last year, the Financial Services Compension Scheme listed their most prevalent scams as phishing (email scams) and smishing (texting scams); boiler room schemes, which promise investors an impressive return but deliver nothing but a big loss; and pension liberation schemes, which target people aged 55+ with bogus investment opportunities to try to get hold of their pension savings.

For the employees, the acid test is: what is the culture of the business really like to work in? Do people feel part of it, do they feel respected, are they comfortable that the business is ethical and fair to customers, and can they raise problems without fear of reprisal?

Read more at businessand industry.co.uk

Targeting penion holders The effects of these swindles can be shattering for an individual. The National Fraud Bureau estimates, since the outbreak of COVID-19, over £7m has been misappropriated from pension holders through scams, leaving many with little or nothing to live on in retirement.

Challenging trust in genuine financial services

Scams also directly impact public trust in the financial services industry, and the continuing challenge we face is to ensure our actions engender trust among savers and in society.

Education is key. People need to know what to look out for in a potential scam, and, importantly, what legitimate firms would never do when contacting a client.

To help the public, the Financial Conduct Authority created the Scam Smart site and PIMFA has launched its Scam Safe campaign and free, publicly accessible microsite. PIMFA will also be giving evidence at the Work and Pensions Select Committee, to raise awareness of the vital role our firms play in combatting pension fraud.

©FEODORA CHIOSEA

WRITTEN BY

Liz Field CEO, Personal Investment Management & Financial Advice Association

I

n practice, do we hear any discussion of what makes a company a fulfilling place to work in? And do we see any reversal of the situation around excessive pay and shorttermism? The UK’s Kay Review2 diagnosed the problems pretty well, but the terms of reference did not open the way to radical suggestions for tackling them.

Hypocrisy in the establishment Try raising the issue of executive pay and the impact of the bonus culture at any meeting of the great and good about corporate social responsibility! I find the question is ducked every time; the system, for all the corporate governance paraphernalia and people’s best intentions, is still fundamentally flawed.

Empower savers to care Instead of “savers” I could have used the words “investors”, or even “ultimate shareholders”. The point is that, if you are saving for the future, the odds are that, one way or another, you are likely to be a part-owner of a large number of public companies. Engaging with, and empowering, ordinary savers is essential if we are to have a voice that counts.

Can we really tackle vested interests?

Yes, but ordinary savers may not have the knowledge or the time. This is about education, empowerment and someone to trust. The trick is that all the heavy lifting has to be done by financially knowledgeable volunteers who are independent of both the financial and corporate sectors. Read more in the separate article “Savers Take Control”.

References 1. See www.uksa.org.uk and https://www.uksa.org.uk/sites/default/files/responsible_investing_2010_members.pdf Whilst so much of the story is depressingly similar in 2019 to 2010, our focus has broadened – we want to reach out to ordinary people who do not currently think of themselves as shareholders.

2. The Kay Review of UK Equity Markets and Long-Term Decision Making, 2011-2012 - https://webarchive.nationalarchives.gov.uk/20121204121011/http://www.bis.gov.uk/policies/business-law/corporate-governance/kay-review

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This material does not contain sufficient information to support an investment decision. Issued in the UK by AXA Investment Managers UK Limited, which is authorised and regulated by the Financial Conduct Authority in the UK. Registered in England and Wales No: 01431068. Registered Office: 155 Bishopsgate, London EC2M 3YD (until 31 Dec 2020); 22 Bishopsgate, London EC2N 4BQ (from 1 Jan 2021). In other jurisdictions, issued by AXA Investment Managers SA’s affiliates in those countries. Š AXA Investment Managers 2020. All rights reserved.

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The impact of the current pandemic has led to an increase in the number of people who are under financial stress.� ~Innovate Finance