Categories: Economy

Thinking of early taking retirement? Think again! Warning from Phoenix boss – WhatsNew2Day

War chest: Phoenix boss Andy Briggs says firm has £1bn to spend on acquisitions

Some have called it the Great Rest, others the Great Retreat. Whatever the slogan, since the pandemic there has been a rise in ‘economic inactivity’, the term to describe people who are not included in the unemployment figures but who are also not working, including thousands of people over the age of 50.

The phenomenon is doing so much damage to the economy that in the Budget, the Chancellor announced a review of why so many Britons avoid work.

Ask Andy Briggs, CEO of pension giant Phoenix, if people should think twice about taking early retirement, and the answer is unequivocal. ‘Absolutely,’ he says. He believes that many underestimate how much money they really need.

‘Our research tells us that more than half of people in the UK are not making enough to support a reasonable standard of living in retirement. This is a decent house, decent food, warmth, not luxury living.

He anticipates a wave of ‘no retirements’, due to the cost of living crisis.

‘I hope the rise in early retirement will be reversed. Two things lead to a better later life: saving more and having the option to work longer in a good quality job.

“Given the lack of understanding of what income people need to retire, there will undoubtedly be a significant number who thought they could afford to retire and can’t.”

Persuading people to work longer is not only good for them, but also for the economy, according to Briggs, who, in addition to his day job, is the government’s business champion for older workers. That might not cut the ice much with those who can’t wait to get their feet up, though it refers to fulfilling activity, not soul-destroying work. A ‘silver army’ of over-50s could help get UK plc back on the path to growth, he argues.

‘We have a huge pool of untapped potential there. If someone is over 50, doesn’t want to work, and has the means not to, my attitude is, ‘Good luck to them.’ But many derive enormous physical and mental benefit from good work.’

The exodus of people over the age of 50 is contributing to severe labor shortages, which in turn is driving up inflation as employers are forced to pay higher wages to hire the staff they need.

Urgent action is needed to reverse the trend, he says. Age discrimination must be addressed in the workplace along with support for those with caregiving responsibilities.

Phoenix offers its employees ten days a year of paid caregiver leave and trains male staff to support their female colleagues through menopause.

Phoenix’s CEO since 2020, he has spent three decades in the insurance industry.

The company originally specialized in buying ‘closed books’ of pensions and savings products that were on sale. This used to be called a zombie business, but is now more respectfully known as ‘heritage’. The idea is that a new owner can manage the old policies more efficiently, reduce costs and improve returns, leading to a win-win situation where customers benefit and the business makes a profit.

Of course, it hasn’t always worked in practice and some people don’t like the ‘pass the package’ element of taking out a policy with one company and then seeing it delivered to another.

However, the wealth business has been a cash cow for Phoenix, throwing in huge amounts of cash and has helped make it the UK’s largest savings and pensions business, with 13 million customers.

The company recently started selling new plans.

After buying ReAssure, the UK arm of Swiss Re, and the Standard Life insurance business and brand, Briggs this summer acquired the UK arm of Sun Life of Canada in a £248m cash deal.

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He says he is “on the lookout” for more possible acquisitions.

“At the start of the year we had £1.3bn we could spend on acquisitions and there’s over £1bn left.”

The war chest, he says, is constantly replenished with the flow of premiums from property business policyholders.

Despite Briggs’ optimism, Phoenix’s stock price has fallen 17 percent in the past five years and has been flat this year. The dividend yield is 8.76 percent. However, there is good news this week about his other big obsession: investing more than the billions under his stewardship in UK infrastructure.

The changes in the Budget, known as the Solvency II reforms, have given it a great boost on that front.

The reform will free up much more than £3.4 trillion of UK pension wealth to invest in housing, transport and equalization.

“We are privileged to invest £270 billion on behalf of our clients and shareholders,” says Briggs. ‘There is a real opportunity there to have a positive impact on society and generate higher returns. We want to invest between £40 and £50 billion over the next five years in infrastructure, mainly in the UK.” Solvency II was EU legislation, designed to ensure that insurers do not invest too much of their savers’ cash in illiquid or risky assets.

Many observers believed that the regulations were too cautious, thus depriving savers of good returns and depriving worthwhile projects of financing.

After Brexit, the United Kingdom has reduced them.

“Without the changes to Solvency II, our investment would have been in excess of £10bn,” adds Briggs.

The gold market chaos around Liability Driven Investing (LDI) strategies that followed the mini-Budget did not affect Phoenix, he says.

“We don’t do LDI, so there are no concerns whatsoever.”

He believes the debacle will accelerate the trend of companies trying to offload their traditional pension schemes onto insurance companies. ‘I have never met a CFO in any industry who is pleased to have a large defined benefit pension plan attached to their manufacturing or service business. They all want out of this.

Phoenix was the second-biggest player in that market behind Aviva last year, with around £5bn in deals.

One of his big concerns, he says, is that nine out of ten people go into retirement with virtually no advice. ‘If people are going to have a better life in the future, they have to make better financial provision. ‘They have to feel trust in the system to do that, and trust has been affected by what happened [with LDIs].’

At 56, Briggs himself qualifies as an “older worker” but has no desire to back down.

‘My wife says she can never see me stop. Sometimes I wonder if she could lower my golf handicap a little more: I play four. But I’m really passionate about what we’re doing. I don’t want to stop until millions of people are on a better path for the future life.’

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