Five big themes underpin long term growth and innovative solutions.
- Ageing populations
- Welfare reform and austerity
- Retrenching banks
- Globalisation of asset markets
- Digital lifestyles
The UK achieved 1.9% GDP growth in 2013, but output is far below the pre-financial crisis level. Structural economic weaknesses remain such as low productivity levels, low real-wage growth and sizeable government deficits. Global markets have been boosted by US asset purchases, but this support is likely to diminish in 2014. In the eurozone, growth is still anaemic. Interest rates are just 0.5% and unemployment worryingly averaged over 12% across the EU, reaching over 28% in Spain.
Regulation and policy uncertainty pose major challenges for the financial services industry. In 2013, we adjusted our business model to regulatory changes from the EU Gender Directive and Retail Distribution Review (RDR). We are concerned that RDR has limited access to advice for less wealthy consumers.
The EU has now provided more clarity on Solvency II, but issues remain to be resolved. We are generally much happier with the outcome from the trialogue process and the proposed treatment of capital for insurers who provide long term guarantees. But new impending UK and EU regulation on annuity sales, ‘money markets’, retail investments and insurance mediation give us a challenging outlook for 2014.