One of the biggest problems when it comes to pension communications is that historically, it’s not something we really needed to worry about.
Cast your mind back to a time when almost everyone had final salary schemes, and those schemes were – dare I say it – in surplus. All trustees really needed to do was send someone a letter once a year that let them know what their pension would be. Simple.
Obviously, those days are long gone. Forget one DB scheme, most people are heading for 12 or 20 separate pots, with lots of different providers.
And because ordinary British consumers now shoulder all the risk when it comes to making sure they have enough to retire on, it seems plain to me that (at the very least) we need to arm people with the information they need to make the right choices.
As we know - there are two main factors that determine whether someone has a comfortable retirement. The first is how much they contribute, and the second is how well their investments perform.
While most people are invested in well-thought-out default funds, the fact remains that if someone’s money does not grow as they would have liked, they just have to accept that. There is no complaining to the asset manager later, because you don’t have as much money as you’d hoped.
On the contributions front, the risk sits with the member as well. Paternalistic (or just forward-thinking) employers may offer fantastic matching, but the onus is on the employee to take it up. And that’s ignoring the fact that huge swathes of employers offer minimum contribution rates and nothing more.
These problems have been explored, at length. We all know that higher contributions are the answer, but reflecting on the recent auto-enrolment review, it seems clear (to me at least) that the Treasury has no interest in allowing DWP to revisit minimum rates at this time.
So we’re back to incentivising or encouraging members to save more. And here’s where the tricky part comes in.
Who exactly is responsible for this critical engagement piece?
Is it schemes themselves? The benefit is that they have all the information members need, but many have neither the skillset nor the time to develop communications campaigns (and arguably no remit to encourage workplace members to pay more).
Is the HR and reward directors? They have a direct route into the workforce – not to mention brilliant data that could create awesome segmented campaigns – but a limited understanding of the intricacy of pensions, not to mention an awful lot of other things on their plates (mental health, workplace disputes, eyecare, company cars).
Or is it the asset managers? They possibly have the most to gain – after all, better contributions mean more assets under management. But do we really want them running the communications with workplace savers, and do they have the lightness of touch to engage people properly.
The answer, I think, is that no one group alone has all the elements needed to make this work. That’s why the industry needs to pull together on communications, education and engagement. It’s the one thing that underpins all the other good work we do (designing defaults, good governance, lifestyling), and without it – the other stuff just goes to waste.
It’s time for everyone to stop thinking “that’s not my job”, because this isn’t really anyone’s job (more’s the pity!) and start thinking in terms of responsibilities. We all know it’s the right thing to do and getting it right – is a good outcome for everyone.
Sara Benwell, Pensions Insight
13 April 2018