How do we improve the ‘pensions consumer journey’?

By Sara Neidle

Pensions today are very different to how they were over a century ago. It was 1908 when the Old Age Pensions Act introduced a means tested pension of up to 5 shillings a week (or in today’s money 25p per week) to people aged 70 and over. This came into effect on January 1^st, 1909, which is known as ‘Pensions Day’. Interestingly, you could only receive this pension if you were deemed of “good character”.  

It is quite remarkable how much things have changed. Over the past 10 years, we have seen some of the most radical changes implemented in the pension’s world including auto-enrolment in 2012, which saw employers enrol their staff into a workplace pension scheme as part of the government’s initiative to get people to save more for retirement. As a result, millions of people now have access to a company pension scheme, many for the first time in their lives. Then we had massive pension reforms which now give consumers more choice when they can access their pension savings - known also as Pension Freedoms. 

Now living in a post pandemic world, we need a new way of thinking about pensions. Numerous studies show that people don’t really engage with their pension, and in actual fact don’t understand their pension at all. That means consumers rely on others to decide on matter such as where to invest their money or when it comes to what scheme they save into. This is a huge barrier. 

The Pensions Regulator (TPR) and the Financial Conduct Authority (FCA) are currently inviting views on what else we can do to help engage consumers so that they can make informed decisions that lead to better pension saving outcomes. There is a greater need to better understand consumer behaviour to help improve pension outcomes.  

Listening to a recent event by Cushon chaired by leading journalist Iona Bain, which focused on the importance technology has to play in solving some of the pensions challenges including member engagement and sufficient retirement savings, Baroness Ros Altmann spoke about how pensions are about people, they are not just about money, they are about making people’s lives better.

You can see how this is a difficult message to get across, when it seems so farfetched. The image of pensions is not only complex and full of jargon, but its actual image is also so negative. Pensions as a word conjures up this thing or feeling of being old, frail, and useless...it is a pretty bleak image.

As Baroness Altmann explains we use pensions to relate to two different things, for example, pensions are about state pension, but we also use this same word for a private savings vehicle. 

Pensions can make people’s lives better if they have the best tools available to them. Many studies show that it is not that people don’t necessarily want to engage, but unless you have user friendly technology, better explanation, and education it is very difficult to do that. 

We need to change this perception, before it is too late. It needs a step-change, a positive spin on it. As Baroness Altmann said, we need new language for example, pensions are free money for you, but no one talks about the free money that comes from an employer’s contribution. It is growing for the long term; it can invest in things that help improve the planet.

We need to move away from this negative image towards a positive one, whereby we are saying to people well done for saving. With this change in mindset, we can promote pensions as a good thing. 

As part of this, we need to improve our communications. For starters, we need to change the language around pensions. Do we even call them pensions anymore? Some people have been talking about a ‘Future Fund’. 

We need language that gets people excited, encourages employees to engage with their schemes, wanting to find out more. Just as people are using shopping apps, travel apps etc., a similar experience is required to keep employees switched on and wanting more. 

We need to simplify pensions communications, for example, pension statements – who even understands what they are communicating? Why do we still have a paper statement?!!? We need to engage people by communicating messaging that consumers can relate to.

Learning from the digital banks and technology companies of this world, it should be about doing right by the consumer. Everything should be centered around the consumer such that they benefit from everything. It is a very simple and empowering message, yet it is an approach the pensions world has not yet fully adopted.

Now is an opportunity for the pensions industry to show consumers that they understand what they want. Enough of seeing surveys which say ‘nearly a third of Gen Xers have inadequate pension savings. Consumers need to feel empowered and that they can make the right decisions. 

Through communications and better engagement, it can help drive this message home that a pension is a positive thing and can have a huge impact on your future.