Will everyone (finally) start to talk about pensions in 2020?
The 2020s are set to be unlike anything the pensions industry has seen before. Built on a foundation of unprecedented sector change: automatic enrolment, pensions freedoms, the continued shift from Defined Benefit (DB) to Defined Contribution (DC) schemes, end of default retirement and regular increases in the State Pension Age (SPA), and combined with a rapidly ageing population, it seems the next decade will have a renewed focus on long-term savings.
But as millions of people will be saving into a workplace pensions for the first time and looking for support to help make the most of their money, will this be the decade, or even the year, that we are finally able to adequately communicate the benefits of putting pensions front of mind?
Harnessing technology – addressing the elephant in the room
One of the best ways to modernise pensions and allow people to better understand what they have saved is to harness technology. Research from the Office for National Statistics found that 73% of adults regularly use the Internet for banking, yet Aviva research shows only one-in-10 use it to manage their longer term “investment services”. For many people, pensions are out of sight thus out of mind.
To combat this, the industry has been fighting for several years to develop multiple digital ‘dashboards’ to allow people to access all their pension information – public and private – all in one place online. First announced in the 2016 Budget, the pensions dashboard project aimed to provide consumers with a simpler oversight of their pensions savings by 2019 that would allow regular connection with their most important savings pots. So, where are they?
Following several delays to the legislation, the project received a boost last year when (both) the Queen’s Speeches recognised the importance of putting long-term savings at the front of people’s minds. As to whether 2020 will be the year when digital dashboards finally become consumer-facing, the jury is still out. This week, Sir Steve Webb questioned whether they would go live in 2020, while Hargreaves Lansdown senior analyst Nathan Long suggested a delay would be a good thing as “rushing a half-baked version would [be] counter-productive”.
Simpler pensions forecasts – a very happy birthday
The UK currently has a system in place where huge volumes of workplace pension information is sent out to consumers as part of their annual benefit statements, resulting in confusion, or the information simply being ignored. Combined with a legacy of being complicated and opaque, it means few people readily engage with their statements. Yet providers continue to send them.
Towards the end of last year, the Department of Work and Pensions (DWP) opened a consultation for simpler annual benefit statements to address this issue. Former pensions minister Lady Ros Altmann wrote a piece in ThisisMoney this week in which she offered a five-point plan to make people more likely to read pension forecasts and get engaged with their savings – including tailoring messages around birthday cards with “Many Happy Returns” greetings and colourful envelopes.
“All providers should adopt a user-friendly ‘direct to customer’ approach to communications, rather than producing materials that only financial advisers and other industry insiders – instead of savers can understand,” said Lady Altmann.
Greater signposting – pension wise
Part of the challenge in getting people talking about their pensions is the need for greater signposting to the right advice. If the sector can get more people talking to advisers about their retirement plans, it would make them more aware of how much they have or have not saved.
Last year the Government launched the Money and Pension Service to serve as a guide for the public to access more information about their pension, and in 2018 the Personal Investment Management & Financial Advice Association called on pension providers to do more to signpost consumers towards advice.
This could involve clearly highlighting ‘key information’ upfront in annual statements or pointing people to the right information via links. Regardless of the way it’s done, it’s important that industry and government do more to help consumers engage with their savings and help them prepare for the future.
But perhaps it is time for more direct communications to bring pension advice to the fore. In 2018, Zurich asked Eastenders to run a story on pension scams to highlight the issue – could the nation benefit from a fictious financial adviser moving to Albert Square or Coronation Street in 2020?
After a decade of ‘revolution’ within the pensions sector, the 2020s could be a period of meaningful – and positive – change. One where pensions harness technology and finds solutions to better communicate pensions with the wider population.
It’s time for long-term saving to have its moment.