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War chest: Phoenix boss Andy Briggs says the company has £1bn to spend on acquisitions
Some have called it the Great Lie-Down, others the Great Retirement. Whatever the tagline, the pandemic has seen an increase in “economic inactivity” – the term used to describe people who are not included in the unemployment rate but also out of work, including thousands of people over 50.
The phenomenon is doing so much damage to the economy that the chancellor announced in the budget a review of why so many Britons are avoiding work.
Ask Andy Briggs, the CEO of retirement giant Phoenix, if people should think twice before taking early retirement and the answer is unequivocal. “Absolutely,” he says. He believes that many underestimate how much money they really need.
‘Our research shows that more than half of people in the UK are not doing enough for a decent standard of living when they retire. This is a decent house, decent food, warmth – not a luxurious life.’
He expects a wave of “retirement” as a result of the cost-of-living crisis.
‘I do expect that the increase in the number of early retirements will reverse. Two things lead to a better life later in life: saving more and having the choice to work longer in good quality work.
“Given the lack of understanding of the income people will need when they retire, there will undoubtedly be a significant number who thought they could afford to retire and can’t.”
Encouraging people to work longer is not only good for them, but also good for the economy, according to Briggs, who is the government’s corporate advocate for older workers in addition to his day job. That may not cut much ice with those who can’t wait to put their feet on the ground, though he refers to satisfying activity, not soul-destroying toil. A ‘silver army’ of over-50s could put UK plc back on track for growth, he argues.
“We have enormous 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 so many get a lot out of good work physically and mentally.’
The exodus of the over-50s contributes to an acute labor shortage, which in turn drives 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 addressed in the workplace along with assistance for those with caring responsibilities.
Phoenix provides employees with paid care leave for ten days a year and trains male staff to support female colleagues during menopause.
Chief executive of Phoenix since 2020, he has spent three decades in the insurance industry.
The company originally specialized in buying closed books of pension and savings products that were being phased out. This used to be called 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 win-win that benefits customers and makes a profit for the company.
Of course it hasn’t always worked in practice and some people don’t like the ‘passing package’ element of taking out a policy with one company and then seeing it handed over to another.
Heritage business has been a money-maker for Phoenix, but has thrown away huge amounts of cash and helped make it the UK’s largest pension and savings company, with 13 million customers.
Recently, the company started selling new subscriptions.
After acquiring ReAssure, the UK arm of Swiss Re, and the Standard Life insurance business and brand, Briggs acquired Canada’s Sun Life UK division in a £248 million cash deal this summer.
He says he is ‘looking forward’ to more possible acquisitions.
‘At the start of the year we had £1.3bn to spend on acquisitions and we have over £1bn left.’
The war chest, he says, is constantly replenished by policyholders’ premium flow from the heirloom trade.
Despite Briggs’ optimism, the Phoenix stock price has fallen 17 percent over the past five years and is in the doldrums this year. The dividend yield is 8.76 percent. However, there is good news this week about his other big obsession: investing more of the billions under his leadership in UK infrastructure.
Budget changes, known as the Solvency II reforms, have given him a big boost in that regard.
The reform will free up much more of Britain’s £3.4 trillion in pension wealth to invest in housing, transport and levelling.
“We are privileged to invest £270bn on behalf of our clients and shareholders,” says Briggs. ‘There lies a real opportunity to have a positive impact on society and generate higher returns. We want to invest £40 to £50 billion in infrastructure over the next five years, mainly in the UK.” Solvency II was EU legislation designed to ensure that insurers don’t put too much of their depositors’ money into illiquid or risky assets.
Many observers believed that the regulation was overly cautious, depriving savers of good returns and denying valuable projects funding.
After Brexit, the UK scaled them back.
“Without changes to Solvency II, our investment would have been over £10 billion,” Briggs added.
The chaos in the gold market around Liability Driven Investment (LDI) strategies after the mini budget had no impact on Phoenix, he says.
‘We don’t do LDI, so there are no worries.’
He believes the debacle will accelerate the trend of companies trying to shift their traditional retirement plans to insurance companies. “I have not met a finance director in any industry who is happy with a large defined benefit plan alongside his manufacturing or service company. They all want out.’
Phoenix was the second largest player in that market behind Aviva last year, with around £5bn in deals.
One of his biggest concerns, he says, is that nine out of 10 people will retire with virtually no advice. ‘If people want to have a better life later on, they must make better financial arrangements. “They have to have faith in the system to do that, and trust has been eroded by what happened [with LDIs].’
At 56, Briggs qualifies as an “older worker” himself, but he doesn’t feel like taking a step back.
“My wife says she doesn’t see me stopping. Sometimes I wonder if I can get my golf handicap a lot lower – I play at four. But I’m really passionate about what we do. I don’t want to stop until millions of people are on a better track for later life.’
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