Back to basics

The recession is showing its face in increasingly varied ways, just at the time when optimistic politicians and economists are saying the worst is over. Like the First World War, the downturn will be all but over by Christmas we are being told, but employers, intermediaries and providers are wisely bracing themselves for a tough long haul.

The fact is that the Government has spent a lot of money it hasn’t got to get us through the worst of the devastation. Now it is trying to figure out how to balance the books. Employers and board directors of financial services providers are in a similar position to that of the Prime Minister. The business plan that looked so rosy two years ago when growth projections were positive is now irrelevant. New projects are on hold and business leaders are making hard decisions about the fundamentals of their operations.

The Budget assault on pensions is only one part of the Government’s response to the task of rebuilding the nation’s balance sheet. Lobbying is under way to attempt to get the worst effects of it overturned, but I am not holding my breath, and the reality is likely to be a tipping of the balance towards Isas and away from pensions in the popular consciousness. This is not great news after all the years of hard work to endeavour to get the concept of pensions saving into the minds of consumers.

As for the group risk sector, some fear that Aegon’s withdrawal from it reflects a reality check on premium rates and could mark the beginning of a new era of hardening prices. In a market already struggling to bring in fresh virgin business, higher prices may reflect the commercial realities that providers are operating in but will not go down well with employers. The group pensions sector has already undergone a realignment to reflect more austere pricing, and, for some providers and intermediaries, the experience was not a pleasant one.

Healthcare seems one area that could potentially benefit from the straitened circumstances that UK plc is likely to find itself in over the next decade. Just last month the NHS Confederation, which represents 90 per cent of NHS organisations, flagged up a £15bn deficit over the next 10 years. The Tories meanwhile are being up front about the reality of cuts across the board in Government spending. And whichever party ends up in power, it is unlikely that NHS standards are going to be able to be maintained indefinitely. Yes employers will be balking at soaring medical inflation, but with more innovation from providers and advisers, the appeal of PMI could well flourish.

The good news for advisers is that demand for the information and advice they possess is as high today as it has ever been. Those firms that profit as the effects of the recession unravel will be the ones that continue to add value to their clients’ businesses. Now more than ever, getting the basics right is crucial.