Written evidence submitted by Age UK (CAF0067)
Evidence submission to
Treasury Committee Inquiry: Consumers’ Access to Financial Services
Contact: Jane.vass@ageuk.org.uk
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Age UK
Tavis House
1-6 Tavistock Square
London WC1H 9NA
T 0800 169 80 80 F 020 3033 1000
E policy@ageuk.org.uk
Age UK is a charitable company limited by guarantee and registered in England (registered charity number 1128267 and registered company number 6825798). The registered address is Tavis House
1-6 Tavistock Square, London WC1H 9NA.
Key points and recommendations
Introduction
Age UK was grateful for the opportunity to give oral evidence to the Committee on 14 November. This submission provides further evidence and key references to support our oral evidence.
Age UK is a national charity that works with a network of partners, including Age Scotland, Age Cymru, Age NI and local Age UKs across England, to help everyone make the most of later life, whatever their circumstances. In the UK, the Charity helps more than seven million older people each year by providing advice and support. It also researches and campaigns on the issues that matter most to older people. Its work focuses on ensuring that older people: have enough money; enjoy life and feel well; receive high quality health and care; are comfortable, safe and secure at home; and feel valued and able to participate.
This submission draws on the many queries we receive from older people each year (which have been anonymised), as well as our policy and research work on this topic which can be viewed on our website. There is much more that could be said about the different forms of financial exclusion that affect older people, but in this response we focus on:
Difficulties faced by older people in managing money
In general older consumers are the same as consumers of any age and face similar problems, for example, the difficulties facing those on low incomes. Many older people are capable and self-reliant and do not wish to be seen as vulnerable. However, vulnerability and financial exclusion can be created or exacerbated by:
Age UK recently worked with the ‘in retirement’ steering group of the financial capability strategy (led by the Money Advice Service) to explore financial resilience in retirement. The key findings of this research in relation to managing money were:
“You don't know how much prices are going to go up… It's not so much how much income you get but about how things are going to increase in expense.”
“We had a friend who had it all planned. We were all hitting retirement near enough the same time and then she died at 59. That was probably the catalyst for me, I thought ‘you’ve got to live for today and enjoy, appreciate what you’ve got’.”
It was ‘I’m saving for a rainy day’, and I used to think ‘it’s pouring! Spend the money now!
“It’s difficult to get hold of them people (in external organisations). We tried a few years ago and in the end we had to solve it ourselves. They want everybody to do it on the internet.”
How has the industry responded?
While there are pockets of good practice within the financial services industry, Age UK believes that overall their response to the difficulties faced by a significant proportion of their potential customers is too limited, too slow and too inconsistent. For example, we highlighted examples of good banking practice in our 2016 report Age-friendly banking, yet no bank has truly implemented this good practice consistently, as this case shows:
Client's father 86 had his bank account frozen because he got a couple of security questions wrong when phoning them. Security questions were created many years ago when account first opened. Father has to pay for care out of that account and his income goes into that account which he needs for food. The bank agreed to continue the direct debits to pay the carers but he could not do anything else. Father did not have passport or driving licence to prove ID and is not mobile. Bank said they could not do a home visit to verify his identity (client thinks this is because it is a 64 mile round trip from nearest branch).
Client complained to bank but felt they were ignored/case was not escalated so they contacted Age UK. Age UK contacted bank’s vulnerability team who acknowledged the errors took place and apologised/spoke to client about what processes should have been followed. Errors included; staff suspending the account rather than moving onto another security question as they should have done, staff not recording large parts of phone calls that client had with bank, and staff failing to escalate the issue internally on client’s request.
Even those financial institutions who recognise the need to change may not prioritise the investment necessary. This is important because often the changes needed are not necessarily ‘new’ systems but changes in existing processes. For example, in our discussions with individual banks after publication of our 2011 report The Way we Pay, some could identify changes to existing systems that would permit some of the developments we suggested, but these are only coming on stream now.
How has the Government responded?
We are pleased that regulators are increasingly recognising the need for change, and welcome reports such as the Competition and Markets Authority’s recent response to the Citizens Advice supercomplaint on the ‘loyalty penalty’. However, exclusion applies across sectors, and therefore change cannot be driven purely by regulators or indeed by individual firms – stronger Government action is needed to ensure that all stakeholders work together across sectors. The Government’s Financial Inclusion Policy Forum is welcome, but in its current form it is purely a forum, driven by particular needs and priorities within the group. We would like to see a more systematic overview, similar to that set out in 2016 by the Financial Inclusion Commission. We believe Government should drive the process more strongly, reviewing progress in all dimensions of financial inclusion and the likely impact of future developments, and setting out a detailed workplan.
Technological change is a major barrier
Many older people have managed their money without major problems in the past but may still face a form of ‘creeping exclusion’ because of constant technological change. Over 79% of all digital exclusion is among those aged 65 and over[i], and internet use decreases with age. While 80% of the 65 – 74 age group are internet users, this falls to 44% in those aged 75+.
There are equalities implications, as analysis of data from the Understanding Society survey tells us that, among people age 65+:
. People with the lowest monthly income (bottom 20%) were over 2.5 times less likely to be using the internet than those in the top 20% of the income bracket.
Older people living on their own are more than two times less likely to be using the internet than households of two or more people.
Those with mobility problems are 1.44 times less likely to be using the internet than those without problems.
People without memory problems are nearly twice as likely to be using the internet than individuals with memory problems.
Data from ONS reports give additional clues about the groups at most risk of digital exclusion. As nearly 1.6 million women aged 75+ live alone, and over a third (34%) of all ‘never users’ are women aged 75 or over (1,647,000), it is reasonable to assume that a large proportion of the households without internet access are occupied by single women aged 75+.
Even those older people who are internet users may not be confident using digital technology for financial services. According to the ONS, nearly three quarters of young people (16-24) use internet banking, compared to under a third of older people (65+). Older people are also much less likely to be using newer forms of technology such as smart phones, and a substantial number (over half a million) are ‘lapsed users’ – people who have used the internet in the past but not in the past three months. The reasons for this are not entirely clear, but it may be that the further people are from the labour market the more they struggle to ‘keep up’ with technology.
While technological change is an inevitable aspect of modern life that will benefit many users of financial services, those who are digitally excluded are also excluded from many forms of financial information, help with shopping around, and the best savings rates. This can increase or exacerbate the ‘poverty premium’ that means that those who are most disadvantaged pay more.
It is vital that essential services such as banking and insurance continue to cater for all citizens. This means keeping existing systems going until suitable alternatives are necessary, recognising the costs for individual consumers of adapting to new systems and supporting them to do so. There has as yet been insufficient discussion of who should bear the cost of change (or reap the benefits) and currently costs fall unfairly on the most disadvantaged, such as socially isolated older people who may need to pay for a taxi to get somewhere to draw cash, or invest significant amounts to get online (even assuming they can do so).
Banking and payments
The most fundamental requirement for being ‘financially included’ is that you have a convenient, safe and affordable way to store money and pay for things, and this lay behind the development of basic bank accounts. Yet there has been surprisingly little focus recently on whether this requirement is being met, and to our mind although most older people now have bank accounts (largely through the drive to direct payment of state pensions in the early 2000s), they may find them increasingly difficult to operate safely, because of the decimation of bank branches and the move to new systems that don’t meet their needs. This is of great concern to older people who depend on the branch network because they are not online or find it difficult to navigate the phone menus and remember the security codes required for telephone banking.
Despite significant concerns expressed by MPs, media and individuals the bank branch network has continued to shrink with at least 2,961 bank branches closing in the last 4 years[ii]. Many communities have lost all their bank branches, requiring personal and business customers to travel considerable distances to visit a branch of their own bank. The Access to Banking Standard, supervised by the Lending Standards Board, does nothing to ensure access, but rather aims to minimise the impact of closures.
The impact assessments produced by some banks understate the problem, we believe, because they define a ‘regular user’ as someone has used the branch every week for, say, the past 23 or 26 weeks. However, the value of a branch is not necessarily for regular transactions but for less frequent essential or non-standard transactions (such as registering a power of attorney or dealing with a problem), and the recent report The Future of Digital Banking from CACI supports this interpretation:
The branch is retaining its importance for most customers, and the decline in branch users is forecast to be much less dramatic. 33 million branch visitors this year, and a resilient 31 million branch visitors in 2023. This is a modest decline of just 6% over the next five years, and hardly the drop we’ve seen in recent years. Customers are continuing to visit their bank branch, but at the same time reducing their frequency of visits.
This holds across age groups, as highlighted in a 2016 report Balancing Bricks and clicks published by the Social Market Foundation:
Most consumers (70%) are happy to carry out simple, day-to-day tasks like checking their balance or paying bills online. A majority are also willing to apply for and manage familiar financial products, like credit cards and insurance, online. But when it comes to big financial decisions, like taking out a mortgage (47%) or seeking financial advice (51%), half the population still prefer to visit a branch
The face-to-face contact at bank branches can also be a significant protection against fraud, with the banking protocol designed to produce a quick response to suspected frauds in-branch reported to have prevented £31m in fraud and led to 240 arrests.
The importance of bank branches to older people was recently highlighted by the ‘Your Voice’ Panel survey[iii] that Age UK runs. The panel is intended to include the views of seldom-heard voices and therefore the results are not necessarily representative of the population across England. Questions about banking were included in our August 2018 Panel survey, in which 604 panellists took part, with the highest response rates coming from questionnaires completed by post and over the telephone, and with a significantly older age profile than for the general 50+ population in England. This survey found that almost 9 in 10 panellists had visited a bank branch in the last 12 months, particularly to withdraw or deposit cash, and around half did so to check their balance, move money or pay bills. Two thirds of panellists had experienced a local bank branch closing in the last couple of years and this had an impact for the majority of them, with two in five having to travel further to visit a bank branch, one in ten switching to a bank with a local branch and one in five switching to the Post Office for their banking, although it did drive some to register for online or telephone banking. Most worrying, however, is that a small percentage reported that they were no longer able to visit a branch at all, or were dependent on someone else to do so on their behalf. This is of great concern because some people who would arguably be able to manage their own money independently via a local bank branch may lose the ability to do so, making them reliant on family and friends (if they have them), and exposing them to the risk of financial abuse. Age UK believes that further research is needed to assess the practical impact on those consumers who are most vulnerable, and how they have adjusted.
The loss of bank branches would be of less concern if alternative systems were already in place to meet these needs. The Post Office network is often cited as ‘the’ alternative and although we agree that the option to carry out simple transactions at Post Offices is very welcome, it is in no sense a substitute for complex or sensitive transactions, or those which require knowledge of an individual bank’s procedures. Age UK believes that shared bank branches should be seriously investigated as a possible way forward.
We do see some innovations designed to meet the needs of some vulnerable groups for example talking ATMs and accounts that help people with gambling addiction that allow certain sites to be blocked. However we are still a long way from true inclusive design of core services. Many of the innovations aimed at vulnerable customers address a single need – so while talking ATMs may be brilliant for people with visual impairments who have good hearing and dexterity, they don’t tend to work so well for older people who may experience a range of difficulties. In addition, because some of the disabilities associated with later life may come on gradually, older people may not think of themselves as ‘disabled’ and entitled to expect reasonable adjustments.
Financial institutions need to do much more to make it clear to all customers that adjustments are available, rather than expecting people to ask for them, and if access to banking remains a problem, a universal service obligation should be placed on banks to provide the core banking services required by older people.
Access to cash
Without truly accessible alternatives available to all, cash remains important. We are very pleased that this has been recognised in the Access to Cash review. If you are housebound and don’t have a trusted friend or family member who visits frequently getting cash is becoming increasingly challenging – some supermarkets are even withdrawing the ability to get cash back at the till. Ironically the harder it is for you to access cash the more important cash will be for you. Counter-intuitively, cash is a great way to delegate payments if you can’t do your shopping in person. You might lose it all, but that is all you’ll lose. Again, although there are new innovations in payments, we’re not yet seeing any that meet the needs of those most likely to be excluded. Those that come closest normally require the user to be confident online or with systems similar to telephone banking, limiting their practical use. They also cost money – effectively an additional disability or poverty premium.
Time and time again promises that change will be inclusive and no one will be left behind have proved empty. We’ve seen cheque replacement plans that never included a workable replacement. Research by Age UK on claiming housing benefit or council tax reduction (now administered locally) found that 41 out of a randomly-selected 100 local councils said that claims could only be made online – and when our researchers pressed for alternatives 1 in 7 councils appeared to offer none.
Age UK thinks that it is important to consider now what the implications of the move online (including open banking) and withdrawal of physical services such as cash and bank branches might be for financial inclusion, for example, how we can ensure that people on low incomes or digitally excluded do not end up having to rely on expensive or insecure payment methods. We think this is an area where the Financial Inclusion Policy Forum could have a clear and important role and we have written to Ministers to suggest this.
Third party access
As highlighted above, the lack of suitable mainstream alternatives sometimes means that vulnerable customers are dependent on third parties to access cash or manage their finances. Age UK advises people to provide Powers of Attorney when appropriate: although we recognise the risks of abuse, there is at least a process in place to resolve issues and if this not working properly then the answer must surely be to improve monitoring and enforcement, rather than remove the option altogether and force everybody to go to the Court of Protection.
However, many people have capacity to manage their own affairs, and a Power of Attorney may not be appropriate in these circumstances. For example, some people may be reliant on a range of different people to shop for them and need to pay them back yet find it difficult to get cash. We suspect that in many cases, people simply hand over their debit cards and PINs, which of course breaches the terms and conditions of their account. In our 2011 report The Way we Pay we recommended that ‘carers cards’ with an audit trail that can show who has spent the money on it and the ability to limit payments should be launched. No such card has yet been launched, although at least one bank is intending to do so and cards with spending blocks for problem gamblers are now available.
The financial services industry convened a Vulnerability TaskForce which recommended that ‘At customers’ request, firms should make it easy for a friend or family member to help manage people’s money’ (Principle 5) which is due to be implemented by March 2019, and UK Finance has produced minimum standards for third party mandates. A review by the Lending Standards Board found that firms are making ‘good progress’, however we think this is an area where it is important for regulators to ensure a continued focus.
Access to travel insurance
Age UK continues to receive queries around finding travel insurance. Although we receive fewer complaints around automatic age limits, we still receive complaints around pre-existing medical conditions, for example:
C went on holiday in January- whilst there he became ill (stumbling/ falls) and was in hospital for 3 days. Hospital said he would not be charged anything. Upon return home he has now received a bill for £5,000 from hospital. Apparently the insurance company have not paid the bill because C did not disclose a health condition to do with his chest. C not aware of this health condition but GP has confirmed this.
I am 72 with many existing medical conditions. I am planning a trip abroad to several countries, later this year. I have always had my travel insurance through my bank, included as a benefit of an account. They will now still provide me with general travel insurance cover but not medical cover, which I have to pay for, and they are expensive! My question, Can I purchase a single trip insurance policy just for “existing medical condition cover”?
We are particularly concerned about the potential increase in the cost of travel insurance if the European Health Insurance Card is no longer in place: see What might Brexit mean for British Tourists travelling to the rest of Europe? in the Journal of the Royal College of Physicians of Edinburgh (2018).
We are disappointed by the focus on signposting in the FCA’s recent response to its Call for Input on Access to insurance in relation to cancer. Signposting may be helpful to some, but simply perpetuates the current marketplace. We already have a similar signposting service for older consumers through BIBA, set up in the wake of the Equality Act. Age UK would like to see a review of how the signposting service is working for older consumers – not just in terms of the numbers of referrals, but the outcomes, i.e. whether people are able to get the cover they need, at a reasonable price. However, the wider question is whether the market as a whole is working for older people. Age UK’s strong preference is for a mainstream market that keeps up with the needs of our ageing population and maintains the largest possible risk pool.
The Equality Act 2010 Schedule 3 contains a very broad exemption for the financial services industry, in that
20A(1)A person (A) does not contravene section 29, so far as relating to age discrimination, by doing anything in connection with the provision of a financial service.
(2)Where A conducts an assessment of risk for the purposes of providing the financial service to another person (B), A may rely on sub-paragraph (1) only if the assessment of risk, so far as it involves a consideration of B's age, is carried out by reference to information which is relevant to the assessment of risk and from a source on which it is reasonable to rely.
However, there is no true transparency to enable consumers to understand whether this condition has been met. An agreement on transparency and access in motor and travel insurance for older people was agreed between HM Treasury and the ABI in 2012, under which relevant information was supposed to be reported, but this was provided at a very high level of aggregation and does not appear to have been updated. Age UK believes that it is time for this exemption to be reconsidered to ensure that pricing really does reflect the requirements of the Equality Act. We welcome the recently announced pricing reviews planned by the FCA following the CMA response to the Citizens Advice supercomplaint on the loyalty penalty.
Access to credit
Age UK recently looked at the change in use of credit between 2010 to 2016 for people aged 50+ using ELSA. We found little change in the percentage of older people using unsecured credit, which hovered around 23/22%, but their use of secured credit has jumped from 8.6-14.5%, presumably because of the increase in the numbers of people retiring with unpaid mortgages. However, we do get continual anecdotal evidence about older people struggling with debt, and more recent data gives cause for concern – for example, MAS's 2018 Adult Financial Capability Survey asked how often people use a credit card, overdraft or borrow money to buy food or pay bills ‘because you’ve run short of money’. The percentage saying very or fairly often was 17% across the whole of the adult population, but still relatively significant 6% for older people in retirement,. So it’s no surprise that local Age UKs regularly report cases of debt, for example:
I recently found out that my Mum has approximately £10,000 in debt on about several credit cards, Her funds are limited and she was behind on many of the monthly due payments. The current problem is that she's suffering from early onstage dementia.
Sometimes problems arise because someone has acted as a guarantor for family debt, or there is potential abuse:
The caller’s father has signed as guarantor for his granddaughter on a loan of £25,000. Loan was made with unregulated broker- debt has climbed over last 6 months to £45,000. Company are now sending father letters to pay - he has already paid £15,000. The caller is considering taking out equity release on the father’s property to cover loan.
We also receive regular complaints about lack of access to mortgage lending:
Call from an older couple, both disabled and in their 70s. They have been on an interest only mortgage for 15 years. When the mortgage was sold to them they understood from the broker that the mortgage would be extended for another 15 years, but this is not happening. The broker has gone bust and the matter is with the FCA (they feel mis-selling has taken place). However this does not resolve the issue that in a few years they need to pay the mortgage off. They would like to stay in the property as it is adapted for their disabilities.
Following work by the Building Societies Association, Council of Mortgage Lenders and the FCA, lenders do appear to be more willing to be more flexible. However, we are concerned that sometimes people may end up taking equity release (which is an expensive and often irrevocable form of lending) rather than being helped with other alternatives:
Caller has an interest only mortgage that will end soon after she turns 75. Caller says that she cannot afford to pay the amount owing and is therefore concerned that the lender will repossess the property leaving him homeless. She has discussed this with the lender, and they have refused to extend it. C says that they signposted to a company which recommend an equity release type arrangement which C feels is prohibitively expensive.
Because debt among older people is relatively low, older people with debt problems are often overlooked. Yet advising them may need specialist advice covering a number of difference subject areas – debt advice, pensioner benefits and in some cases regulated financial advice, if people are considering equity release or drawing on pension savings. There is a real need for specialist advice that is tailored to these needs.
Financial advice or financial capability?
Age UK has financial capability programmes running in some areas, through which we support older people with income maximisation, adjusting to changing technology and understanding financial products (which can be challenging for people of any age, let alone someone who may have left education in the 1930s at the age of 14).
However, these programmes are time-limited and only available in some areas, and the Money Advice Service has no programmes targeted specifically at older people. It is vital that, in developing its strategy, the new Single Financial Guidance Body ensures that the needs of older people who are struggling are not neglected. In many cases, what they require is detailed and personalised financial guidance across several specialist financial areas.
However, the fundamental challenge is one of product and service design. Our last word must go to a recent correspondent:
I have been a loyal XXX Bank customer for over 57 years. On my last visit to the XXX branch of the Bank on Friday I was greeted by 3 machines and one counter clerk. A young Bank employee informed me that the counter would be closed at an unspecified date and she was there to train me in the use of the machines…….I was informed of the policy to "educate" customers which is another word for "training" as I informed the XXX Bank representative which I find insulting. Customers and those who represent them need to educate their Banks on their requirements.
Submitted January 2019
[i] See Age UK’s recent Digital Inclusion Evidence Review, accessible at https://www.ageuk.org.uk/globalassets/age-uk/documents/reports-and-publications/age_uk_digital_inclusion_evidence_review_2018.pdf
[ii] Which? accessed 1/10/2018 https://www.which.co.uk/money/banking/switching-your-bank/bank-branch-closures-is-your-localbank-closing-a28n44c8z0h5
[iii] Age UK’s Your Voice panel is a self-selected panel of over 770 people aged 50+. It is not representative of the 50+ population and is particularly weighted towards those aged over 75 and those perhaps less likely to engage with other research or panels. The panel aims to include ‘seldom heard’ voices, so we recruit panellists through a wide range of sources offering a choice of how to take part - online, through the post or by telephone - whatever suits their needs/preferences. Out of 604 panellists, 398 were aware of bank closures in the area where they lived and answered a question (prompted) about the impact on them of these of bank branch closures. Fieldwork took place in August 2018.