Communicating pensions complexity
Ever changing pensions policy means many aren't trying to engage. Is better education and communication the key?
With the amount of fiddling that has taken place in pensions legislation over the past few years, it’s little surprise that employee and consumer engagement in this subject is fading fast.
And with the Department of Work and Pensions (DWP) having just launched a new advertising campaign to raise awareness of auto-enrolment for micro-businesses, featuring the workplace pension personified as a fluffy cartoon monster no less, it seems the government is all too aware that complexity could be turning people off.
According to research from the CIPD, only 77% of defined benefit pension scheme members know what they are contributing, and only 55% know what their employer is paying in.
This research found that almost a quarter (22%) did not know how much they should be saving for a comfortable retirement. A further survey by actuarial consultants Hymans Robertson found that 37% of Britons are not interested in learning about pensions because government policies keep changing.
This complexity can “scare” some people, according to CIPD research adviser of resourcing Claire McCartney. “It is often something that is pushed to the back of [people’s] minds and something that they hope will turn out alright in the end,” she said. “Therefore, it is really important that more information and education is provided to employees regarding their pensions from both employers and the government.”
However, Lesley Williams, group pensions director at Whitbread and chair of the Pensions and Lifetime Savings Association (the newly rebranded NAPF), believes that while education is important, it will not solve the problem alone.
Speaking at the NAPF conference in Manchester, Williams placed the blame for complexity directly with pension schemes, government, regulators and providers.
“Saying the answer to the issues we face lies solely in educating savers sounds to me like saying that savers themselves are the problem,” she said. “Yes, we talk about trying to help them, but implicitly we are blaming them for not getting it.
“How would you feel if you got on a plane expecting to get to Spain and someone opened the cockpit door and said: ‘‘Here you are, you fly it. We’ll give you a manual and you can even call someone for some guidance, but now you are on the plane it’s your journey so you have to work it out.’ That sounds absurd, doesn’t it? But it seems to me that’s what we’re doing [with pensions].”
However, others feel that a solution lies not in rewriting the pensions industry to make it easier to understand, but in the industry encouraging pensions providers to look at ways of creating clearer channels of information. Doing so would allow savers greater control over their personal pot without overloading them.
SSGA head of European defined contribution Nigel Aston told HR magazine not every consumer needs to be an expert to feel more in control of their retirement savings.
“Endless layers of regulatory ‘simplification’ over time haven’t seemed to have helped us,” he said. “The answer lies, perhaps in how, what and when we communicate, rather than in trying to streamline the underlying construct.”
He added: “The investment industry is starting to innovate in more user friendly outcome-orientated solutions, such as target date funds. These intuitive and straightforward ‘hands free’ options leave the DC consumer to concentrate on the area they can directly impact - how much to save - rather than the complex and sometimes bewildering investment choices previously on offer.”
The final word goes to Williams, who made a plea that will hit home not only with bewildered savers, but also with those many HR professionals who are tired of the tinkering around the edges in this most important of workplace benefits: “Why can’t we make pensions and lifetime savings easier to understand and to use?” she said.