The financial challenges of care in old age have been confronting successive governments for years, but there’s little sign yet of a solution and new figures confirm that the cost for individuals is still an increasing worry. After the Queen’s Speech offered no prospect of early action along the lines suggested in the Dilnot Report last year – including a cap on an individual’s total contribution to their care costs – healthcare analysts Laing & Buisson painted a bleak picture.

Average annual care home costs, they reckon, have risen to around £27,000, up almost a quarter in five years. Meanwhile, the value of the asset many people rely on to cover these costs – their own home – has typically made no worthwhile gain. The obvious consequence of this is that someone’s total assets will now be depleted more rapidly by care home fees, even if they are able to avoid selling their house during their lifetime by using the secured borrowing sometimes available from local authorities.

Some people may not have to pay, even now, despite having assets well above the modest means-test threshold. Many in Scotland qualify to have care home or nursing home fees paid for them. More widely, some with severe medical conditions may be entitled, via stringent assessment procedures, to NHS Continuing Care covering personal and nursing care. There may otherwise be an NHS contribution just to nursing care.

Against the backdrop of Laing & Buisson’s figures, it is important for an elderly person and their family to know whether pension income and investments will continue to cover residential care fees for their remaining lifetime. Depleted assets could force the family to contribute or arrange a move to a cheaper care home.

One private sector solution to the financial uncertainty of how long someone will live is a care fees annuity bought from an insurance company to pay future fees for life. A care fess annuity, in current circumstances, can be a very effective way to crystallise the cost of impending fees for those with sufficient capital available to purchase one and still have something left over.

Given a care costs cap, or at least greater clarity and consistency of official policy, insurers might be able to develop more products to enable forward-looking individuals to cover themselves at an earlier stage at more moderate cost. A cap would be expensive; maybe the nation just can’t afford it.

Commissioning a survey can be an effective way to gain publicity for a product or service, especially if the results are interesting or controversial enough to attract coverage by heavyweight national media. This point has just been proved by the insurer we used to know as Liverpool Victoria but now sounds like something to do with Luncheon Vouchers. It hired pollsters ICM to conduct a survey of parents on whether they ever take their children on holiday during term time.

As well as highlighting LV=’s involvement in travel insurance, the survey did throw up some interesting results about parental attitudes. It also revived the old, old controversy about family vacations being more expensive during the school holidays than in term time – though a clearer example of the basic economic principle of supply and demand influencing prices would be hard to find.

The LV= survey certainly achieved objective No.1, as the story was picked up by the BBC, who attributed it to LV= Travel Insurance. So, a key step was taken in linking LV=, already familiar as a car insurer by virtue of a massive TV ad campaign, with holiday insurance cover. As families planning their holidays were likely to pay attention to the story, they would also be potentially receptive to the message that they could get their travel policy from LV=.

As for the results of the survey: interesting, but no real surprises. More than half of respondents said they had taken their children on holiday during term time and the leading reason for this was cost. Another reason was the inability of one or other parent to get time off work during school holidays. That is quite an issue, as some businesses would indeed struggle if all employees with school-age children took two weeks off during the same six-week period.

Moving on to the issue of holiday pricing, parental irritation is understandable, but it would be difficult in a free and international market to require or even expect a package holiday company to have level pricing throughout the year. Demand varies with the seasons as well as with school terms and level pricing would probably break the travel industry. It is well known that the profitability of airlines is seasonal and that, without the peak periods when demand enables them to fill planes despite higher fares, they would not be flying for long.

The Scottish financial sector has a proud history, having created some highly respected investment houses, insurance companies and banks. Things have changed somewhat, with a banking crisis that brought Bank of Scotland and Royal Bank of Scotland to their knees. Now Scotland’s other note-issuing bank Clydesdale, once owned by HSBC predecessor Midland but currently part of National Australia Bank with Yorkshire Bank, has announced cutbacks after profits slumped.

Bank of Scotland’s fall from grace was disastrous. Established in 1695 and, until the turn of the millennium, respected for its adherence to traditional prudent banking, Bank of Scotland was long protected from predators by a 30% stake held by Edinburgh-based Standard Life. When the mutual insurer decided to sell out in 1996, the bank felt vulnerable. It was under pressure to perform and ventured into dangerous territory.

Meanwhile, the former Halifax Building Society, demutualised in 1997, was similarly worried and keen to widen its banking services. Eventually, in 2002, Bank of Scotland and Halifax tied the knot and created the two-headed monster named HBOS. Their managements fought for supremacy, while incompatible ex-building society and pukka banking systems made integration difficult. Well, you know the rest…

South of the border, Lloyds Banking Group was busy with acquisitions of its own. Lloyds Bank, with a solid banking history to rival Bank of Scotland’s, had already bought the Trustee Savings Bank and rebranded. Thus it was Lloyds TSB that decided in the late 1990s to follow the bancassurance route and bag itself a big insurer. In 1999, it bought historic Scottish Widows in a multi-billion-pound demutualisation, bringing windfalls for policyholders.

This deal was a disappointment for Scotland and for some independent financial advisers with no love for the big banks’ ambitions, but it initially seemed good for both parties, despite suggestions that Lloyds had overpaid. The banking crisis changed everything. As the crisis deepened, HBOS tried to shore up its capital with rights issues that bombed. In 2008, Lloyds agreed to take it on, bringing two of Scotland’s finest – Bank of Scotland and Scottish Widows – under the same roof, which promptly came crashing in.

Now it seems the part-nationalised banking group may accept a divorce settlement with one of a number of suitors sufficiently impressed by memories of Amanda Lamb in a black veil to offer a few billion for the Widows’ hand in marriage. Ugly HBOS may need a dowry.

At least as much as in other areas of business, marketing communications should always get the right message to the right recipient at the right time. Before the technological revolution, failings were excusable, particularly if something was transmitted indirectly by word of mouth. That was how, in the old Army joke, “send reinforcements, we’re going to advance” became “send three and fourpence, we’re going to a dance.”

Fast-forward to 2012 and a London Olympics far removed from the last time in 1948. Media and communications have been revolutionised during those 64 years; but this doesn’t mean that effective communications are always easy. That was proved by the dilemma, as reported by the BBC, faced by the coaches of the GB Olympic hockey squads.

Only 16 players each will be selected for the men’s and women’s squads, from pools twice that size. Given what could be a once-in-a-lifetime chance, half will be elated and the other half deflated, so, rather important to get the message 100% correct. With extremes of emotion to follow, having the whole group together for selection announcement has drawbacks, as highlighted by midfielder Helen Richardson’s uncomfortable Sydney 2000 experience.

The answer, of course, was for the coaches to do what the instinctive communicator would do – let the recipient choose the delivery method. So, the coaches decided to ask their players how they would like to hear their fate, the main options being a telephone call, a text message, an email or in person direct from the coach. In the end, simultaneous emails looked like the method of choice, but it was not that simple.

GB women’s squad coach Danny Kerry was quoted thus by the BBC: “The interesting thing is the incredible detail they went into. It wasn’t just that they wanted an email at a certain time, it was how the email came. It has now been agreed that, on selection day, the email will come from my fingertips at 0800. There will be no attachment, it must be written in the body of the email, because they don’t like opening attachments on their phones.”

Danny went on to explain the importance of respecting people’s preferences if you want them to feel valued. That principle applies in business, too, and highlights how carefully we should all think before transmitting our marketing message. Asking a client what they would prefer is a good way to bully-off.

The much-heralded rise in stamp prices has had a predictably distorting effect on the pattern of sales. Promise a future price rise in anything or predict a shortage and, provided it is something people want or need, there will be a rush to buy. We see it with petrol station queues and now the same thing is happening with, of all things, postage stamps. Royal Mail has letter rate rises of about 30% in its pipeline and users want to fill their boots.

Royal Mail has a particular problem. Whereas garage storage capacity, plus our cars’ tanks and the odd jerry can inevitably limit retailers’ and end-users’ ability to stockpile, stamps take up little space. There aren’t any investments guaranteed to rise by 30% at the end of the month, so the letter-writing public are heading for post offices and the numerous retailers that sell stamps on RM’s behalf. These are seeing their stocks dwindle and have ordered more.

This all spells a big problem for Royal Mail. It could take many months for RM to feel any benefit from the price rise if everyone buys at today’s rates but uses the stamps after the new rates apply. The monopoly mail service is now seeing the downside of ceasing to print the face value on certain stamps, simply designating them 1st class letter, 2nd class large letter, or whatever. Ironically, the earlier decision was probably to save printing costs when postal rates change and existing denominations become inconvenient.

This hasn’t been such an issue in the past, when postage hikes have been less extreme. Now, given surging consumer demand and the need to boost stocks, some retailers have naturally seen a big opportunity to counter some of the gloom on the high street. Why not bulk buy as many stamps as possible at the old rate and sell them over the rest of the year at the new?

So, on top of the increased demand from consumers, RM is faced with massive additional orders from retailers wanting to warehouse as many stamps as possible. It’s healthy market forces at work and a risk you take when you exploit a monopoly situation to impose a frankly outrageous increase on a diminishing captive market. Now RM has imposed rationing on retailers. Talk about living in the past. If you must have a stamp to send a letter today – DON’T PANIC!!

Unlike several of their Northern Irish and Scottish counterparts (including RBS), banks based in England and Wales are not permitted to issue their own banknotes. So, what is the latest organisation to start doing what Barclays and Lloyds can’t? Some prestigious institution, you’d have to think. Well, the answer is the Bristol Credit Union.

The Bristol pound has been created through a partnership between the Bristol Credit Union and Bristol Pound Community Interest Company; notes will start circulating in May. It has the backing of Bristol City Council, so presumably a valid legal loophole lets the credit union tread where clearing banks cannot. There are precedents, notably in London’s Brixton district, the Sussex town of Lewes and the Devon river port of Totnes.

The Bristol scheme looks altogether more ambitious; a major provincial city adopting its own currency seems to border on a unilateral declaration of independence. Yet the Bristol scheme seems only partly political idealism, more a combination of social enterprise and something close to our hearts – marketing initiative. The brief: put the West Country’s biggest city on the map and help to get more folk spending money there.

So, how does the scheme work and why would people be willing to accept a security-printed Bristol pound? Well, as with any currency, it needs credibility and anyone holding Bristol pounds will want to be sure of getting value for them. So, in addition to the support of various public and private sector entities from the region, the scheme has enlisted many independent traders willing to accept the local currency.

The traders can apparently feel confident that they won’t be left holding worthless vouchers that aren’t ‘legal tender’ by Bristol City Council’s assurance that it will accept payment of business rates in Bristol pounds. The Bristol Credit Union will also switch Bristol pound notes back into sterling for a 5% exchange fee, or credit them to a Bristol pounds account that has electronic transfer facilities.

As for the success of the Bristol pound as a marketing concept, the scheme has already gained wide press coverage. Loyal Bristolians will surely want to use the currency, especially as its spending power may be enhanced by special retailer discounts. So, it could indeed help to keep citizens’ spending within the city, aiding independent retail and leisure businesses whilst promoting the Bristol Credit Union, which is in the Financial Services Compensation Scheme.

There was a piece on a TV consumer advice programme recently about marketing of the life insurance that some providers offer the over-50s. It is low-value cover that could meet, or contribute to, funeral costs. For some, it provides peace of mind, as nobody wants their demise to place a financial burden on relatives.

Trusted, ageing celebrities are often used in advertising such policies, which are probably more appealing to the less well-off than to those with no worries about their funeral expenses. If less well-off can also mean less financially aware, then it is obviously important that all prospective policyholders understand what they are committing to and for what benefit.

The TV show cited a case where relatives of a lady well over 80 were upset because they had calculated that premiums already paid exceeded the sum payable on death. They also seemed shocked that if she stopped the premiums now there would be no payout at all. The elderly lady appeared not to understand the policy terms, albeit many years after taking it out.

There may be issues here that could add over-50s plans to the list of ‘mis-selling scandals’. Certainly, this case and others like it highlight the importance of ensuring that policyholders, however unsophisticated financially, understand what they are buying. Arguably, there is nothing inherently wrong with the plans, even if somebody who lives long may ‘lose out’.

Maybe some elements of the British public just don’t want to understand the concept of insurance. In general, it is the fortunate that gain least in financial terms. Most forms of insurance are intended to benefit or recompense those, or their relatives, unfortunate enough to suffer something that much of the population escapes (OK, everyone dies eventually!). We suspect that mis-selling allegations made in hindsight rarely come from people who have benefited from their potentially mis-sold policy.

Back to the over-50s plan: we’re not saying that nobody has cause for complaint, but these no-medical-required policies must be a magnet for people who are in poor health but expect to survive the one or two-year qualifying period for claims. Thus, the policies may not be as lucrative for insurers as the case highlighted on TV tended to suggest. They may be ‘poor value’ for over-50s in perfect health – but who really knows whether they are, or won’t die in an accident? Surely that’s the point about insurance.

The impending 39% increase in the lowest second-class postal rate, from 36p to 50p, is something that anyone involved in greetings card marketing could have done without. Times are tough enough without TV news bulletins featuring indignant passers-by declaring their intention to send all greetings online in future. The writing paper and picture postcard markets have already collapsed due to email and photo messaging.

It probably wasn’t entirely a case of cause and effect but, two days after Royal Mail’s announcement on postal rates, major retailer Clinton Cards warned that the outlook for its current financial year had deteriorated. The company suffered a £3.7m loss in the half-year to end-January, compared to an £11.7m profit in the same period a year earlier, and the current half-year looks challenging.

Bravely, Clintons put the poor financial performance down to a difficult retail environment and weak consumer confidence. If only it were that simple; the recovery cycle would put things right in a year or two. No surprise, then, that a store portfolio restructuring (code for ‘closures’) is under way and Clintons’ recently-installed chief executive has ordered a strategic review of the business. Sale of its Birthdays chain is on the cards.

So could this mean curtains for Clintons? No, not curtains, but maybe some other form of product diversification could help to exploit its considerable high street square footage more profitably. Of course, Clintons is not alone in the retailers’ battle to save the conventional greetings card – or reinvent themselves – but the bigger they are… Casualties among greetings card retailers seem inevitable this year.

The problem all card shops face runs parallel to the challenge confronting Royal Mail; there are now other ways to send greetings to friends and relatives, so conventional card sales look certain to plummet. Not only that, unlike the Royal Mail monopoly, the shops face competition between themselves. Basic birthday cards that often go for about £1.50 are offered at seven to the pound in shops such as Card Factory.

Then, as well as the animated electronic greetings cards available on the internet, there are the personalised cards from the likes of Moonpig and Funky Pigeon that are ordered online and mailed direct. Other sales channels include Phoenix Trading, which operates via work-from-home mums and other local agents. ‘Get well soon’ and ‘good luck’, Clintons.

It’s probably just as well that Royal Mail has a monopoly on end delivery of domestic letter post. Otherwise, its announcement that postage rates will rise by around one-third on 30 April would have read like a suicide note. The increases from 46p to 60p for a 100g first class letter and 36p to 50p for second class, show that RM does not inhabit the world of commercial reality. This has historical reasons; some remain valid.

Current pressures on RM’s financial performance stem from the need to fatten it up for probable privatisation and from the falling mail volumes due to burgeoning text and email use. This semi-political scenario, which includes transferring RM’s pension deficit to the Government, was the backdrop for regulator Ofcom’s ‘decision’ to allow RM freedom to set the first class rate provided second class does not break an inflation-linked 55p in the next seven years.

Hiking prices spectacularly is an unusual reaction to declining sales. So, why is RM so special that commercial reality can be suspended? Well, it’s down to that monopoly situation. It must be thought that RM’s captive market will not desert in such numbers after the price hikes as to leave it with less income. Why should RM have a monopoly anyway? Again, political and social issues – basically, to maintain the universal rate for letters throughout the UK.

The universal tariff making a letter from the Scillies to the Shetlands cost the same as from Leeds to Bradford seems sacrosanct. But it’s not just overall distance that counts. Remoteness of destination is a big factor. It’s obviously cheaper to deliver in urban areas than around Dartmoor. And that’s another reason for maintaining the monopoly. Commercial competitors, it’s widely felt, would cherry-pick the easy stuff, leaving mid-Wales the Outer Hebrides to RM.

Furthermore, competition in letter post delivery (it already exists for bulk letters) would be counter-productive if it meant five or six postmen tramping the same streets to deliver the same overall quantity of mail. That would be as obviously inefficient as a two-tier system that meant separating out some mail and deliberately delaying its delivery!

So, electronic mail is the future – key beneficiary BT, which originated from the separation of the Post Office’s telecoms business from its mail service back in 1981.
Can RM survive long-term? That will be down to politics, because only ongoing control over final delivery will enable it to hang on to the residual captive market.

We usually aim to keep politics out of our blog, but one event calculated to get finance, politics and selling all entwined is the Chancellor’s Budget statement. With a Coalition, the selling part is all the more difficult. The Chancellor has to sell his plan not only to his own party but also to another whose views are inherently different. Then he has to sell it to the nation.

Even in the run-up to Budget Day, there were rumblings of discontent on the Government backbenches over an expected cut in the 50% tax rate, while the Chancellor’s often-repeated words ‘we’re all in this together’ were still echoing around. Such dissent can usually be suppressed, but what about his Coalition partners’ vehement opposition to tax cuts for the wealthy?

It seems the Chancellor had a two-pronged marketing plan. First, come up with some figures to show that cutting the top rate of tax for £150,000-plus earners from 50% to 45% would cost, well, virtually nothing really. The argument went something like: if the rate is lower, the wealthy won’t so much mind paying it so will be less inclined to evade or avoid it.

If his backbenchers bought this out of loyalty, there was no prospect of the Coalition partners’ Budget team doing likewise. They would want something in exchange and that something was a concession towards a £10,000 tax allowance. Thus, the Chancellor’s second prong was a hefty £1,100 increase in the personal income tax allowance from April 2013. Sold, to the gentleman with the yellow tie!

The ‘hard working families’ espoused by all politicians seemed to like the rise in personal allowance, but you can’t please everyone. Linked to the increase was some ‘tax simplification’ that would involve phasing out the higher age-related allowances. These would be frozen until the basic allowance overtook them; over-65s would see no rise in allowance until then and would thereafter have the same allowance as everyone else.

The Chancellor, it seems, thought OAPs would be so delighted with this year’s inflation-linked 5.2% rise in State Pension that they wouldn’t worry about the allowance freeze. After all, it wouldn’t take any cash from them; they just wouldn’t get more. As many of them saw it, they and a few super-rich types liable for the new ‘mansion tax’ were funding the cut in the 50% income tax rate. They really weren’t sold on that.