Pensions boss: Think again if you’re planning to retire early

That’s the stark warning from the boss of pensions giant Phoenix as inflation means your savings may not go far enough

SOME have called it the Big Lie-Down, others the Great Retirement. Whatever the catchphrase, since the pandemic there has been an increase in ‘economic inactivity’ – the term to describe people who are not included in the unemployment figures but who are not working either, including thousands of over-50s.

The phenomenon is doing so much harm to the economy that in the Budget, the Chancellor announced a review into why so many Britons are shunning work.

Ask Andy Briggs, the chief executive of pensions giant Phoenix, if people should think twice before retiring early and the answer is unequivocal. ‘Absolutely,’ he says. He believes many underestimate how much money they really need.

‘Our research is telling us that well over half the people in the UK are not doing enough for a reasonable standard of living in retirement. This is a decent house, decent food, warmth – not a life of luxury.’

He anticipates a wave of ‘unretirement’, due to the cost-of-living crisis.

‘I do expect the increase in early retirement to reverse. Two things lead to a better later life: saving more and having the choice of working longer in good quality employment.

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

Persuading people to work for longer is not only good for them, but also good 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 much ice with those who can’t wait to put their feet up, though he is referring to fulfilling activity, not souldestroying toil. A ‘Silver army’ of over-50s could help put UK plc back on the track to growth, he argues.

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

The exodus of over-50s is contributing to an acute labour shortage, which in turn is driving up inflation as employers are forced to pay higher wages to recruit the staff they need.

Urgent action is needed to reverse the trend, he says. Ageism needs to be tackled in the workplace along with help for those with caring responsibilities.

Phoenix offers employees ten days a year paid carer’s leave and trains male staff to support female colleagues through menopause.

Chief executive of Phoenix since 2020, he has spent three decades in the insurance industry.

The company originally specialised in buying up ‘closed books’ of pensions and savings products that were in run-off. This used to be dubbed zombie business, but is now more respectfully referred to as ‘heritage’. The idea is that a new owner can run the old policies more efficiently, reduce costs and improve returns, leading to a winwin where customers benefit and the company makes a profit.

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

Heritage business has been a money-spinner for Phoenix, however, throwing off huge amounts of cash and has helped turn it into the UK’s largest pensions and savings business, with 13million customers.

Recently the company started selling new plans.

After buying ReAssure, the UK arm of Swiss Re, and the Standard Life assurance business and brand, Briggs this summer snapped up Sun Life of Canada’s UK division in a £248million cash deal.

He says he is ‘on the lookout’ for more possible takeovers.

‘At the start of the year we had £1.3 billion we could spend on acquisitions and there is over £1 billion left.’

The war-chest, he says, is constantly being replenished with the flow of policyholders’ premiums from the heritage business.

Despite Briggs’ optimism, the Phoenix share price has fallen 17 per cent in the past five years and has been in the doldrums this year. The dividend yield is 8.76 per cent. There is good news this week, though, on his other big obsession: investing more of the billions under his stewardship in UK infrastructure.

Changes in the Budget, known as the Solvency II reforms, have given him a big fillip on that front.

The reform will free up much more of the UK’s £3.4trillion of pension wealth to be invested in housing, transport and levelling up.

‘We have the privilege of investing £270 billion on behalf of our customers 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 £40 to £50billion over the next five years, in infrastructure, primarily in the UK.’ Solvency II was EU legislation, designed to make sure insurers do not plough too much of their savers’ cash into illiquid or risky assets.

Many observers believed the regulations were overcautious and therefore depriving savers of good returns as well as starving worthwhile projects of funding.

Following Brexit, the UK has scaled them back.

‘Without changes to Solvency II our investment would have been more like £10billion,’ Briggs adds.

The gilt market chaos around Liability Driven Investment (LDI) strategies following the miniBudget didn’t affect Phoenix, he says.

‘We don’t do LDI so there are no concerns whatsoever.’

He believes the debacle will speed up the trend for companies to try to offload their traditional pension schemes on to insurance companies. ‘I have never met a finance director in any sector who is pleased to have a large defined benefit pension scheme attached to the side of his manufacturing or service business. They all want to get out of it.’

Phoenix was last year the secondbiggest player in that market behind Aviva, with around £5billion of deals.

One of his big worries, he says, is that nine out of ten people drift

into retirement with virtually no

‘I expect a reverse in early retirement’

‘People have to feel confidence in the system’

‘We want to invest £50bn in infrastructure’

advice. ‘If people are going to have a better later life, they have to make better financial provision. ‘They have to feel confidence in the system to do that, and confidence has been dented by what went on [with LDIs].’

At 56, Briggs himself qualifies as an ‘older worker’ but has no desire to step back.

‘My wife says she can’t see me ever stopping. I sometimes wonder whether I could get my golf handicap quite a bit lower – I play off four. But I am really passionate about what we are doing. I don’t want to stop until millions of people are on a better track for later life.’