#37 Standard Life CEO: British Aren't Sufficiently Financially Literate

0:12Hello and welcome to the Big Boss interview podcast from the BBC. I'm Will Bain. Nice cheerful podcast introduction for you today. It was announced recently that as of 2026, more people in the UK will die every year than are born. This coupled with an increasingly older out of work population means there's a huge knock on effect how retirement is paid for. Felicity Hanna is with me. And Fliss, you've been speaking to someone whose role is very much front and centre in all of this.

0:41Andy Briggs:Yeah, Will, I've always known you must be great fun at parties, but that absolutely cemented that. Yes, I have been speaking to Andy Briggs, CEO of Standard Life, absolutely massive organisation. It looks after 12 million customers, plus it's got£317 billion of assets under management. That's going to rise to half a trillion once their current takeover of Aegon UK is completed. So absolutely loads to ask the man at the top of that, especially that changing population question you were talking about, the political upheaval or potential for political upheaval, the war in Iran, and whether any of us are saving enough into our pensions to actually have a decent retirement.

1:22Andy Briggs:And spoiler alert, he doesn't think most of us are. Let's hear from him then. This is Andy Briggs, the chief executive of Standard Life, talking to Fliss.

1:36Andy Briggs:Andy Briggs, welcome to Big Boss Interview. Thank you, Fliss D. We're recording this on Thursday morning as much of the UK goes to the polls. There's already been a lot of political froth and rumour, including the suggestion there could be leadership challenges, even some significant changes at the top of government. What impact does political upheaval have for a business like Standard Life? So I think if I look at it from our customers' perspective, what's really important is consistency over time from all dimensions, politicians, regulators, the broader pensions market, because people are saving over multiple decades.

2:12And to be confident to do that, they need to be confident that the market will be consistent and the saving they're making will reward them in terms of their income in later life. So I would say consistency over time is really critical.

2:25Andy Briggs:And do you feel that that's a consistency that's been lacking in the UK recently? I'm actually positive in terms of the whole pensions outlook. I mean, I've worked in the sector for nearly 40 years and the market's never been as exciting as this. There still is significant under-savings. There still is something that needs to be done and addressed. But I would say that the key things that need to be addressed are being faced into. So as this government came into power, and indeed with the previous government, we had three specific asks. One was that people aren't saving enough for a decent retirement and to look at pension adequacy, and there's an independent pension commission doing that.

3:00The second was that only 10 % of people are getting advice as they journey to and through retirement. And again, the Treasury and the regulator are coming up with a new regime called targeted support, which will help far more get that help and support. And then the third is that UK pension savers will get a better outcome if they had a more diversified range of assets, including allocation to private assets. And again, through the Mansion House Accord, we're addressing that. So I think a lot of the right things are in place. We just need to drive through on them strongly going forward from here.

3:29Andy Briggs:So when you say it's never been more exciting, you mean that in a positive way? Yeah. It could mean one of two things, couldn't it? Yeah, I do mean it in a positive way because the pensions in the UK used to be defined benefit. And that gave customers a really excellent, reliable income in retirement. But that basically closed down about 20 years ago. And since then, people haven't been doing enough. But a lot of the things that need to be put in place for people to get a better retirement are now starting to come together. There's more to be done to follow through on all of that. But we're starting to address some of those areas.

4:01And so the market overall is growing strongly because people are saving more and making more provision. And that's great for consumers. It's also great for a business like Standard Life.

4:10Andy Briggs:And we'll get into more of that and how much people are saving and whether it's enough. But I am curious, politics is changing across the world. And in the UK, we've got challenger parties, more to the left, more to the right, more populist parties taking votes. Does that make it harder for a business like yours to plan your longer term investments and to look ahead at what kind of regulation and country you're potentially planning for? We're fortunate in many ways because what our business relies on is three things. It relies on people getting older, which is going to happen. It relies on people wanting to stop working one day, which again is going to happen.

4:47People will want to retire. And it relies generally on the over 50s having more of the assets. And again, that happens as well. So we're much more immune to the day-to-day changes, if you like, that go on geopolitically. From an investment perspective, what's really critical is that we have real scale. So we already have Standard Life over 300 billion of assets. We're buying Agon's UK business. That will take us up to half a trillion of assets. And that means that we can then have a very broad, diversified range of investments for our customers. And therefore, you don't get exposed to one particular risk.

5:24You can be much more diversified in terms of the range of investments you offer because of the scale that we have and therefore more reliable outcomes for customers.

5:33Andy Briggs:And let's talk then about global instability, specifically the war in Iran. What has that meant for Standard Life? So the biggest concern we have is the impact that has in terms of uncertainty for customers. So we're not seeing any material changes in customer behavior at this stage. But as energy prices go up, as inflation goes up, that can be a concern for customers in terms of cost of living. as that actually plays through for standard life as a business what we find is we're pretty resilient through all of that and that's because pension saving in the UK basically is done through the workplace through auto enrolment in the workplace and that comes out of people's gross pay before it gets the net pay so as we went through for example COVID as we went through the high inflation following the Ukraine war and the Liz Trust mini budget higher interest rates and so on.

6:27Our business actually carried on pretty unaffected by any of that, because generally what consumers do is they look at their net pay, and then they economise there. So it's more likely to be Netflix, for example, that they look at rather than their pension contributions. So we are fortunate as a business that we're very resilient in whatever the economic climate.

6:46Andy Briggs:We hear from our audience lots of concerns that pensions and investments will be affected by what we're seeing and the global fallout from the conflict. Can you reassure them? Yeah. So as I say, I think what's really important is to take a long term view and not worry too much about shorter term turbulence. People are saving over multiple decades. What's really important is to have a very diversified range of investments and not be overly exposed to any one sector. So for, you know, people worry, for example, about an AI bubble. So what we make sure while while we obviously have investments on behalf of our customers into some of the, say, for example, the big US tech stocks, we keep it to a relatively modest proportion.

7:30So they have a very diversified range of investments. And so I think the key message I'd say to customers is make sure you have a diversified range of investments and look at it over the long term. Don't get overly concerned about short term volatility. Pensions is a long term game.

7:45Andy Briggs:Does that mean that you're worried about an AI bubble if you're limiting your exposure to those big tech stocks? I think that there's always risks of bubbles in different areas. In many ways, I think if you look at the AI side, I think what's interesting there is that a lot of the funding going into it is now debt-based. So that would have far less of an impact in terms of our customers. But what it means is that when it becomes debt-based, you have to have a stream of cash generation in order to pay that debt interest. So I think that does start to become potentially more interesting. We still have an allocation to tech stocks.

8:20Don't get me wrong. I'm just saying that it's really important. There's a very diversified range of investments across multiple sectors, multiple countries, multiple asset classes, including an allocation to private assets as part of that. We think that's what will get the customers the best diversified returns.

8:37Andy Briggs:When it comes to what we're seeing in Iran, though, and you're talking about it's time in the markets, not timing the markets, but will customers be poorer as a result of this conflict? Will it affect their pensions, their investments, their savings? Yes. So I think that that really depends on the extent to which there are long term implications of this. And most of the economists, I think, are predicting that there will be shorter term turbulence for this, but not a long term structural impact. If there isn't a longer term structural impact, then it won't have a material impact on pension savers because it is a long term gain.

9:15Andy Briggs:We spoke to the St James Place CEO on this podcast. He told us that around the time of the Rachel Reeves budget or before that budget, people were drawing down their pensions. Did you see that kind of behaviour? Yes, we did. Fortunately, it wasn't anything like as bad in 2025 as it was in 2024. But this goes exactly to the point, Felicity, I was making earlier. that consistency is really important. So we feel very strongly that pensions needs a long-term, sort of multi-decade, cross-party consensus on the strategic direction. It is not something that should be speculated about in each budget. Because what happened is there was speculation that the tax-free cash would be, that people can get a quarter of their pension pot tax-free, and there was speculation that that would be removed.

10:05What then happened as a result, particularly in 2024, is lots of customers ended up taking their tax-free cash, the quarter tax tax-free, because they were fearful that that benefit would be removed. It wasn't removed. And then what happened is subsequently those customers had that money then in a taxed environment rather than a tax-free environment. And in a situation where people don't have sufficient provision for a decent retirement, we can't afford to then make them worse off and have things that make them worse off. So it's really critical that there is consistency over time. And there isn't speculation in each budget cycle that we'll be tinkering around with pensions.

10:45Andy Briggs:But there has been significant change to pensions just in the last few days. Last week, the Pension Scheme Act passed into law. It is arguably the biggest overhaul of pensions in a decade. It requires pension funds to be bigger, more ambitious, more efficient, and to invest more in UK infrastructure. What do you make of the changes? So overall, we're supportive of the changes. Some of the key elements, for example, the requirement for scale, we're strongly supportive for exactly the points I was making before. Because only if you have scale can you then invest in a very broad, diversified range of investments.

11:21And you need the scale to be able to get that breadth of investments. So taking an example of allocation to private assets, which again is part of the pensions bill, part that we're strongly supportive of. We see that as really beneficial to customer returns, but you need scale because ultimately you don't want customers exposed to just a small number, for example, of growth equity opportunities or infrastructure opportunities. You want them to have a very broad range of them. And if you have scale as a pension provider, you can do that. And Felicity, let's just sort of touch on in terms of the allocation to things like infrastructure and productive assets.

11:56So the benefit for customers is that they get a better, more diversified return. If I just give an example of this. So over the last decade in the UK, pension savers have had a real return. So return after inflation of about 4 % per annum over the last decade. Their Canadian counterparts, that's been 5.2 % per annum over the last decade, real return. In Australia, it's been 5.5 % per annum. The biggest single difference is the allocation to these productive assets, these private assets. That's the biggest difference between those.

12:29Andy Briggs:Don't you think if it's more profitable, if the returns can be greater, if these other pension funds can see it from other countries, then the government shouldn't need to mandate that pensions in the UK behave in a specific way. Surely all the brain boxes sitting behind computers in your offices can work that out and move money there independently. Yes. So I would agree with that. We're not supportive of mandation. Obviously, what happened in the pensions bill on mandation ended up significantly less than was perhaps originally proposed, which I think is positive. But we think this is absolutely in the best interest of customers to get them a better, more diversified returns.

13:05It's also beneficial for the broader economy because these productive assets generally have a multiplicative effect on economic growth. And ultimately, for any developed nation with an ageing population, the economic growth is really critical. Otherwise, you end up with the proportion of people retired increases relative to the proportion of people in work. And so when that's happening, you really do need economic growth to not have an ever increasing tax burden on those working. So we can get better returns for our customers and have a beneficial effect on the broader UK economy. That's a real win-win.

13:40Andy Briggs:Multiplicacy is a brave word to use on air. I wouldn't have tried that one. OK, let's talk about mandation then. Let's get into that a bit more specifically. So people who don't follow this quite as closely as we perhaps do, this had been one of the most significant changes the government had planned, that it would have had the power to compel private pension schemes to invest a minimum proportion of assets into specific areas. So 5 % of a pension fund's assets would have to be invested into British investments. It has been watered down now, but I'm curious to know if you think it'll still achieve what the government had hoped.

14:14So many of us in the industry and standard life play a key central role as one of the largest players in the market. We came together voluntarily in something called the Mansion House Accord, where we said that we wanted all of us, most of the industry wanted us to be allocating up to 10 % of our customers money into these productive assets. There'll still be 90 % in public market assets. It'll be 10 % in private market assets in these productive assets. we've said that all voluntarily anyway but but what we think is really important is that this is a choice for customers so so we will effectively look to do this in our default funds funds that customers are defaulted into but if they choose to schemes that they get automatically signed up to yeah exactly that but but then if if customers choose that they have a whole range of investment options they don't need to go with the default it's what they go into if you like automatically but then they have a choice of others and we think it's important that customers have that choice it's their savings, it's their retirement, it should be their choice as to how they invest that and not mandated and forced in a certain way.

15:18Do you think the government's made a mistake? So we weren't supportive of mandation. I do think the way that that has gone back and forward between the House of Commons and the House of Lords has got to something that is less of a concern. We still wouldn't be having mandation. We don't think that's right for our customers.

15:35Andy Briggs:The government says the changes that it's making will benefit the average worker to the tune of up to£29 ,000 by the time they retire. If that's right, that is a substantial amount, even in something the size of a pension. Is it right? Yeah. So, I mean, obviously, it depends on how you look at the numbers. But if you just take the points I made about the 4 % real return in the UK compared to 5.2 % in Canada, 5.5 % in Australia, If that happened over a whole lifetime saving to retirement, then the Canadians and Australians would have about 60 % more in their pension pots of retirement than the UK savers.

16:13That's the impact of just that sort of one, one and a half percent additional return compounded over a 40 year period. And so we do think it is significant. Also, the benefits of scale. So Standard Life, as we join up with and buy the Agon UK business, we have nearly half a trillion of assets. That makes us the biggest player in UK retirement savings and income by some margin. And we have a history of buying businesses. And we share some of the benefits of the efficiencies we get with customers in the form of lower charges over time. And obviously, that means, again, that their retirement incomes will be greater.

16:49So we've seen firsthand that consolidation in the sector leads to more efficiency in the sector and therefore some of which can get passed on to the benefit of customers.

17:01Andy Briggs:The government says it's going to publish a report identifying what the barriers are to investing in the UK. With soon to be half a trillion of assets under management, I imagine they'd be pretty interested in your view. Yeah, so I think we're making good progress in terms of moving this forward. quite a lot of what needed to be done was on the regulatory side. So for example, one of the concerns that you know, a very valid concern is that a lot of these productive assets, the private assets, they're illiquid. Now, if you're thinking about a pension fund, give me an example, a lot of people listening, they're not living in this world.

17:35Andy Briggs:So when you say they're illiquid, what kind of thing are you talking about? So a great example, we recently invested 60 million pounds with Bromley Council to build 320 affordable homes in Bromley. So one of the societal challenges is is not enough affordable housing. So we invested in that, that then becomes a liquid asset, if you like, it's not something that we could go and trade in the market and sell tomorrow. It's something that we do need to hold for, you know, sort of 20, 30, 40 plus years. But because we're only putting up to 10 % of customers money into that, and this is a long term pensions game, that that liquidity is not is not an issue.

18:13We've still got 90 % in public market assets that you can trade on an exchange day by day. But a lot of the regulations needed to change around the use of eliquid assets, the structures you put them in. So a lot of, in terms of your original question, Felicity, a lot of that is then in place. But what we really need to do then, so there's sort of two elements to this. We need to, first of all, bring together a lot of the great innovation we have in UK universities. And for us to be doing the scaling of that with our customers' money, A lot of that is currently done by, for example, North American investors will scale those businesses.

18:49And very often what then happens is that the owners of those, the builders, the creators of those businesses are then persuaded to re-domicile the whole business of the US. And the UK economy doesn't get that benefit. So we want to start to see far more UK pension savers starting to back some of those sort of growth equity type opportunities. that the other area would be infrastructure would be another another great example so I gave the example of social housing so you know when you sort of start to think about you know that the housing needs of the UK then you start to get into all sorts of challenges around planning rules for example when you start to think about infrastructure so so you know we we look at the moment oil and gas prices going up and you know if we had more wind wind-based energy we have a lot of wind in the UK, for example, we would have far less inflationary impact on ordinary consumers of rising oil and gas prices if more of our power was self-generated through wind.

19:49But then again, you start to come into planning constraints. One of the challenges is that where you want to put the wind farms, the strength of the national grid isn't strong enough to sort of take the power from there.

19:59Andy Briggs:I sort of feel like what you're saying is, if the economy was better, the economy would be better? What specifically would you like the government to do or any future government to do that would make us more like these other countries you're citing and remove barriers to investment? Yes. So I think the things I've said, so the commitment of the providers through the Mansion House Accord is an important part. The legislative and regulatory change is an important part. And then it's getting the stream of the right types of projects for infrastructure investment, for growth equity investment. I think all of these initiatives are in train.

20:35I think we just need to follow through on them so that we end up getting that benefit of better returns for customers and getting the benefit in the broader economy.

20:44Andy Briggs:Let's talk about those individual customers then. The government predicts someone retiring in 2050 is set to have 8 % lower private pension income compared to somebody who retired last year. Almost 15 million working age people are not on track to have an adequate retirement income. What's going wrong? Yes. So basically, the fundamental issue here is that we have auto enrolment in the UK. So anyone who joins an employer with more than five employees is automatically enrolled into a company pension scheme that has to happen. They have a choice to opt out. Fortunately, virtually no one does opt out because it is important to make provision for the future.