Saga IPO: how healthy is the grey pound?

Is Saga genuinely – as I’ve recently seen it described – an over–50s lifestyle brand? Or is the financial services equivalent of a hospice?

March 6, 2014 | By:

Saga, the old folks' firm, may float on the stock exchange any day now. But, says our business guru Michael Wilson, there's '50+' and 50-plus. Does its market really have so much cash to splash?

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Intensive care: Saga built a great business by focussing on the needs of the elderly and frail. Photo from Corbis

I remember feeling profoundly depressed when the first Saga junk mail dropped through my letterbox.

Apart from a slight concern about how they had got my address, I had a sad apprehension of being consigned by the marketing industry to an old dears’ comfy zone of elasticated waists, and pasty-shaped shoes (and let’s not even think about the incontinence paraphernalia).

Still, in its time, Saga was a brilliant idea. Back in the days when it was usual to peg out in one’s seventies, they latched onto the wealth and exploitability of the clients in God’s waiting room, and built a fantastic business providing that group with travel and financial services. 

These days, the organisation tirelessly campaigns within the impenetrable thickets of pension legislation, and has become one that governments have to consult on the subject. Yet its support base remains one from which marketeers shy away.

Ask any adman what associations the brand summons up, and he will likely include in his list: retirement; cruises on clapped out ‘liners’; and a view of life that – while it is relentlessly cheerful – is still bedevilled by failing powers and the remorseless realisation that one is destined for that great allotment in the sky.


Take that view with the traditional marketing wisdom that, by late middle age, most consumers’ brand loyalty is pretty immoveable, and one begins to understand why only around ten per cent of the UK’s total annual advertising spend goes on campaigns aimed at the senior market.

This despite the fact that those over 50 hold the vast majority of the nation’s wealth; and that spending among those in the 30-to-49 age group has slowed almost to a standstill.

So should potential investors in Saga’s £3bn IPO be concerned about growth? After all, on the face of it, the company is part of a very solid business.

Saga’s parent Acromas , which also owns the AA, has over five million insurance policies, over £5bn of savings on deposit, and in the year to February 2013 reported combined sales of £1.3bn from its financial services.

However, the amount by which Saga contributed to those figures is not clear. Nor is the parent company giving too much away until there is a final, final decision on if and when it will list.

Given a sudden surge in IPOs feeding the renewed hunger for a good punt – like the one that recently gave the Royal Mail such a nice run – then let us assume it will, and any time soon. So now potential shareholders must determine by how much more can Saga actually expand.

Splitting the demographic difference

In that context, one key question is: with whom does Saga actually connect? Is it genuinely – as I’ve recently seen it described – ‘an over–50s  lifestyle brand’? Or is the financial services equivalent of a hospice?

In other words, is it talking (and selling to) the highest-spending part of the over-50s demographic, or actually serving the over-70s – who understandably have less and less money for non-essentials, and who begin to think more about survival than living the life?

Saga boosters would point out that, if you lump every Briton over 50 together – and that includes about 15,000 centenarians – the total demographic controls 80 per cent of all the wealth in the UK (estimated at £5.4 trillion).

They would add that, by 2034, 40 per cent of the UK population will be 50-plus; and that the over-50s have experienced a 25 per cent increase in disposable income in the past four years (in contrast to a two per cent rise for those below the half-century).

However, such assertions mask one vital fact: the real segment that everyone should want to get their hands on is the 50 to 65 year-olds.

These are the fastest growing group of Internet users and social-media joiners, and are the most likely to pass on what they like to their friends (now, alas, known as ‘viral marketing’).

What’s more, by 50, the average Briton is free of debt – including the mortgage – and is opening his wallet again. Hence, although they only represent about ten per cent of the UK population, the 50-65s account for 40 per cent of all discretionary spending power,

Contemporary 50- to 65 year-olds are more cash, time and health rich than any other demographic. But attitudinal surveys suggest their vision of the future is very different from that which retirement brands once peddled so successfully.

So how would you bet? Can Saga keep pulling off their old tricks? Or, in 2014, are they now a shade too grey?