The second main strategic issue facing Standard Life is the demographics of the population in relation to the change in the working population over the next 20 years and the effect this will have on consumer demand and the company’s survival. Consumer demand is constantly changing, you can see patterns in the types of pensions the consumer goes for. Its sways from occupational to private and back again.
Factors like bad PR, the stock market, government regulation and employer contributions all effect the way in which the consumer decides to go for a private pension or an occupational one. The latest changes in pension’s regulation by the government means that there could be a sway from private pensions back to occupational ones.
They also show how the UK has an ageing population, this chart http://www. statistics. gov. uk/cci/nugget. asp?id=6 shows that the bump around people aged 40 in 20 years time will retire and those around 16-30 will become the middle bump. Note that this 16-30 group is significantly smaller that those currently at aged 40, this means that the government in state pensions and the private pensions companies, like Standard Life, will be paying more out it pensions and benefits to those in retirement that they will be receiving in from those of main working age.
This will ultimately lead to a deficit in both the government and Standard Life’s finances; they will have to find the difference from somewhere to make their accounts balance out. This is creating what is known as the pension’s crisis and is what the government and pensions companies are currently liaising on to try and resolve. It is important that Standard Life play a part in resolving the pension’s crisis because it directly impacts the companies’ profits and long term objectives.
I have chosen this issue as the second most important strategic issue for Standard Life because if the company is not profitable then its members will leave and the eventually the company will not have enough money to run its day to day procedures and will have to cease trading. The third main strategic issue facing Standard Life is regulation. Many IFA’s are now reluctant to sell “with-profits” as they are not transparent to the customer and the FSA and the Financial Ombudsmen allowed the customer to say that they have been missold because of a lack of transparency.
Investing and implementing new regulations that make products more transparent will eliminate some of the risk related to selling products and compensation claims. New documents like the Key Facts documents are a classic example of making it crystal clear for the consumer exactly what they are paying to the IFA and what they are getting from the investment house. I have chosen this as the third most important strategic issue facing Standard Life because it plays an important part in the profitability and brand image of the company.
If the company follows all the regulation set out by current government and the FSA then there should be no fines from the FSA for not having put guidelines and regulations into force. By being amongst the first to implement the FSA regulations as and when they are released they generate good PR as it shows the Standard Life and compliant and are always following legislation. Would you want to invest money in a company that is very slack at implementing the latest regulations?
On the other hand by implementing the latest legislation as soon as it is published they run the risk of there being cracks in the policy and this is when people bring compensation claims, like with the transparency of what fees/commission the consumer will actually be paying the IFA. Looking ahead to the future Standard Life will have more regulation to deal with as the EU becomes more involved in the UK and creates regulation like the FSAP (Financial Services Action Plan) which provides the framework for achieving the objectives for a single European market.