Opinion
22nd October 2021
John Dovey is a Client Relationship Director, at Paragon Customer Communications, working in the investment and savings industry.
Pension engagement through digital communication has been an industry topic for longer than we might think. In fact, two decades ago, industry specialists were urging providers to consider how targeted digital content, through media such as gaming and video, can promote better pension engagement. Technology from these early discussions has moved on; but the underlying message remains the same.
The Pension Landscape
In today’s connected world, member engagement is still extremely low, despite the pension landscape having evolved significantly through schemes, policies, regulations, and demographic changes.
Today, there are fifteen times as many savers in defined contribution (DC) schemes than in defined benefits (DB), following the launch of auto-enrolment in 2012. Alongside greater freedoms from pension reforms, this shift means that members now carry more risk in planning for their retirement and in achieving long-term outcomes. This includes decisions about increasing monthly contributions, switching out of default auto-enrolment funds, or consolidating previous employer pots.
With this new scale and scope, governing bodies have begun to increasingly focus on individual pension experiences and the risk of harm from continued disengagement. More recently, the Financial Conduct Authority (FCA) and The Pensions Regulator (TPR) launched their joint call for input to explore the factors affecting how consumers save for their retirement and to find ways to improve journeys from workforce entry to retirement.
This call for action draws on some stark findings in the FCA’s ‘Financial Lives Matter’ 2020 campaign, including:
- 2 in 5 (38%) of those currently contributing to a DC pension do not know how much they or their employer are paying into their pension.
- One third (31%) of adults with a DC pension do not know who their pension provider is.
As regulators tighten their expectations on providers to improve member outcomes, we must recognise that the consumer landscape itself is quietly, but largely, reshaping. Despite media attention on millennial ‘disruptors’, through more immediate trends, increased life expectancy and declining birth rates mean that our population is steadily transforming. With the UK median age shifting towards later years, providers must design a differentiated and coexistent cross-generational service model, to support next-generation savers within an increasing ageing population.
Building a better future
Undoubtedly, digitalisation brings extensive opportunity for the retirement industry to understand and engage more with its members – from analytical replay of online self-service portal journeys that capture user experiences and trends, to building pension tools and video content in apps and across social media platforms, and opportunities from accessing pension information in one place, under the ‘Pensions Dashboard Programme’. However, complex opportunity brings challenge – and digital capabilities are only as effective as the data that underpins them.
Consolidated and real-time data-driven content must be harnessed in ways that accurately guides members towards the right considerations or actions, at the optimal time or life stage. Providers should consider the cost impact from data inaccuracies, especially under future consortium or industry-backed platforms, that will come to rely on cleansed data sets. Secondly, and just as importantly, when does guidance cross over into advice? Schemes and trustees must consider the compliance implications from ‘nudging’ non-advised members, that could potentially affect someone’s retirement or lead to harm.
Without this intervention though, more and more members will continue to experience pension shortfalls in their lifetime. Pension deficits overwhelmingly affect certain groups, as evidenced through the gender and ethnicity pensions pay gap data. According to research by the Chartered Insurance Institute (CII), the average pension pot of a 65-year-old woman in the UK is £35,800, one fifth of the average man’s pot, worth £175,000+.
In the savings and investment industry, legacy operating systems have held back technology innovation programmes that can benefit members. Where internal systems lack interoperability and host disparate and siloed data sets, an agile and cloud-based resilient ecosystem can integrate a series of new interventions, as technology evolves and develops further. This will prevent scheme providers from simply building the next legacy operating model and allow for effective integration with future third-party consumer-engaged solutions.
Embracing technology innovation is essential for improving pension journeys - but requires a blend of digital and human-led consideration and design. Highly personalised and engaging content is critical for overcoming disengagement, irrespective of the media or channel preference. Ultimately, this will not only meet regulatory expectations; but help to shape and improve stronger outcomes for all scheme members.
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