Growing workplace pension pots are a recipe for greater government scrutiny

It’s fair to say 2021 was not a vintage year for many things, but for consultations it was a bumper twelve months. A bumper twelve months for consultations – not only in quantity, but in complexity and the operational demands that policymakers intend to make of pension providers.

It would be tempting to imagine this was mere chance and that this level of activity might reduce – but this, I think, would be extremely optimistic. It is unlikely that we have even reached the highest tide of intervention yet.

This is because workplace pensions are starting to become genuinely significant. Not just for the delivery of future income in retirement but also as flows of investment. Government departments other than the Department for Work and Pensions (DWP) are eyeing up what pension funds could be used to achieve. So far, we have seen a tentative move to encourage pension funds to increase their investments in infrastructure by amending rules relating to performance fees and the price cap. We’ve also been required to help combat climate change by putting in place processes to identify and mitigate climate risk.

Reforms on the horizon

At the same time, the UK continues to pursue a raft of reforms designed to increase engagement with pensions and the value for money obtained by savers. These reforms could be seen as gradually retro fitting the UK pension system while in-flight. Gradually taking us to the place it would, in an ideal world, have been rational to start from, when designing a mass DC-based pension system more than a decade ago.

These reforms include the continued promise of contribution increases, requirements around annual statements and dashboards, pursuing an efficient system for the consolidation of small pots, and the push for smaller schemes to consolidate unless they can demonstrate that they deliver value for money.
There are many wider government policies which could have some degree of impact on workplace pensions, meaning it is very important that the bigger picture is considered with retirement savers’ needs at the heart of any long-term strategy.

The consequence of not having a longer-term strategy in place is less civil service resource being applied to testing a proposition, and thus a greater likelihood of ill-thought through policies. In the pursuit of the short-term advantage drawn from newspaper headlines, there is every chance a policy designed to achieve something else altogether, may be casually allowed to damage the first objective of pensions – which is to provide retirement income.

The interest of departments other than the DWP in the sums held by pension schemes is unlikely to abate. A consequence of Brexit is historically low flows of foreign direct investment. The long-term consequence of Brexit is also lower government revenues than would otherwise have been the case. Simultaneously, the pressures on the UK government to do more to deliver on net-zero will also increase. This is because there is currently very little substance behind its ambitions to deal with the two main causes of UK carbon emissions and deliver either a full roll out of electric vehicles or to deliver a replacement for the domestic use of natural gas. It’s difficult to predict what it will do if it has to deliver last-minute crash investment programmes.

The growing importance of DC pension pots

We are also inexorably moving towards the time when retiring generations are no longer relying on defined benefit (DB) pensions. This will inevitably mean that defined contribution (DC) pensions will become more salient for individuals as part of their pensions. We already know how powerful the politics of the State Pension are in the UK. The intention behind workplace pensions was that mass DC would become the vital bolt-on to the State Pension. We can suppose that in a similar fashion, mass DC will come to hog the headlines too; unsurprisingly, as for most of the population, the DC pension will become the difference between something better or retirement on the poverty line.

We are not yet at the stage where workplace pensions feature as the centrepiece of electoral platforms. More established workplace DC regimes, like that in Chile, are already there. However, we can already see the forces that will propel us in that direction. 2021 was busy, the rest of the decade will be too.

Landmark anniversaries show how far an industry has come

In 2022, The People’s Pension and auto-enrolment will be 10 years old and we’ve both come a long way in that time.

The People’s Pension now has 5.6 million members and more than £16 billion of assets under management. We’re a core provider in a system which has brought more than 10 million workers in the United Kingdom into pension saving – something that was a dream just a decade ago.

Like many other national workplace pension saving systems, the UK’s auto-enrolment regime is still being refined as it matures. The government has either promised to enact or is considering a range of changes in 2022, which will impact on pension schemes and their members. There are other items which are at the review stage. We also think there are a couple of areas where the government and regulators need to look at how recent rules are being implemented in practice.

Timetable for reforms is needed

The government has promised to change some of the initial auto-enrolment rules to ensure that employees save more towards their retirement. These amendments would lower the age limit for auto-enrolment to 18 and calculate people’s pension contributions from the first pound they earn.
We’re also calling on the government to lower the £10,000 earnings trigger to the lower earnings threshold for National Insurance – of £6,240 – to help 1.3 million more people, the clear majority women, save through auto-enrolment. We hope that during 2022 the government will set out its timeline for making these improvements.

The DWP will also need space in the legislative calendar to pursue another major pension reform. The minister has rightly been pressing workplace pension providers to come up with a low-cost consolidation system for small pots. The outline of such a system is now available. To be made operational, however, it needs the DWP to put in place a statutory framework. Two areas which are not yet ripe for any rule changes but will be under review in 2022, are annual statements and retirement products in workplace schemes.

Learning lessons from abroad

Our wish list for items we would like the government and regulators to look at in 2022 also includes enforcement of value for money and greenwashing investments. The first would, of course, only follow once the government concludes its current work on how to measure it. But the lesson from Australia is that value for money rules only start to have an impact on the market once the pension regulator begins to check that it is being applied rigorously.

Pension schemes are also required to play an important role in combatting climate change. However, without better guidance as to which kinds of investment are genuinely sustainable, there is a risk that competition could drive down standards. Some schemes may be tempted to undertake superficial activity to signal green credentials to customers, where the investment risks releasing increased amounts of carbon in the future.

We look forward to celebrating the two significant anniversaries in 2022, while continuing to work to make the saving experience easier and more attractive for employees.

Why did I join a different financial services business?

So, I was intrigued when the opportunity came up to join B&CE – provider of the largest independent UK master trust, and a leading financial services profit-for-people organisation.

Building financial foundations for life

I found the idea of focusing on doing what’s right for members, with no need to satisfy shareholder investors, an exciting and liberating prospect. I wanted to join an organisation where our combined efforts could help make a difference to millions of UK savers.

B&CE’s vision of being a different financial services business made a lot of sense to me.

Using profits to help people

So, how do B&CE go about providing value for money and investment options for 1 in 6 adults and still generate enough profit to directly benefit its members?

Well, as we don’t have to pay shareholders, we can put profits to good use supporting our members.

Here are some examples of how we’ve done this:

  • Closing legacy pensions products

We moved members from older more expensive legacy pensions products into our better-performing and cheaper master trust – we chose to fund the move on their behalf for their benefit.

  • A new charging structure

Last year we introduced a rebate on our management charge and we’re now returning c.£1mn  to members in reduced charges every month – a figure that’ll increase substantially the more members save. We believe this is the right thing to do as it incentivises people to save more for their future.

People have entrusted all pension providers with protecting their hard-earned money and that doesn’t only mean keeping it safe, it means making sure charges are fair and proportionate and good returns are generated. A big part of delivering that sits with good financial control and making sure that monies are available at the right time to fuel growth and provide products and services customers need now, and will need in their future.

Grow and protect our members’ money

We need to ensure the business remains financially strong and future-proofed for our members, so further increases in scale are important to us – our size is absolutely correlated to the positive role we want to play in wider society.

Whether it be through our parliamentary work on pension scams or our calls on the government to lower the earnings trigger, our aim is to improve the pensions industry for all savers.

Greater scale gives us greater influence over where and how our members’ money is invested.

Use profits to help people today and tomorrow

Quite simply, we want to help our members become financially stronger, today and tomorrow, and to help them build better financial foundations for life. Find out more about what makes us a different financial services business

Helping members make sense of pensions

When it comes to pensions, we know what many people might be thinking – ‘we don’t need to worry about our pension’ or ‘the State Pension will be there for me when I retire’. But the truth is, this isn’t always the case. Our Recorded Online Update could help your employees or employer clients get their heads around these often-misunderstood subjects.

Encourage your employees or clients to get involved

Our update aims to answer the pension questions that really matter to your employees or employer clients. So why not share it with them?

Simply download the email template in our communications toolkit.

Giving our members a voice

Why did we record this update? Well, we wanted to give our members the chance to ask questions and hear directly from those who look after their pension savings. Our experts highlight some key topics for them to consider, so we can try to improve their life in retirement and showcase the importance of saving into a workplace pension with The People’s Pension.

Our video is split into sections, so you can watch it all in one go or by topic. Based on the questions asked by our members, the update covers topics including:

  • Consolidation – combining pensions
  • Responsible investment
  • Protecting your pension

Don’t miss out – watch our Recorded Online Update video.

Recorded Online Update – showcasing the importance of your pension

Supporting our members

The past year has proved to be tricky for everybody – but we’ve taken some key learnings from it. As ever, the focus of The People’s Pension’s Trustee board centred on safeguarding our members’ interests. How are we continuing to consider your needs? Well, in a nutshell:

  • Coronavirus response – we’ve worked closely with our colleagues at The People’s Pension to provide investment reassurance, highlight the risk of pension scams and promote our vulnerable customer helpline. With many members directly impacted financially, we want to help where we can.
  • Investment governance – the Scheme’s risk exposure and investment strategy has been carefully monitored throughout the year.
  • Scheme management – the Trustee’s Risk, Administration and Communications Committee (RACC) has assessed – and implemented ways to reduce – risk, and evaluates Scheme communications. The RACC has put continued good member protection at the centre of its work.
  • Administration – The People’s Pension are always looking for ways to refine customer service and deliver a strong retirement savings journey for our members. We try to ensure that the right people are put in place to deliver the service standards our members expect.
  • Value for members – we believe the Scheme represents good value. This Trustee assessment is supported by responses to research with our members and employers.
  • Communicating and reporting – we aim to share important updates with our members at the right time.

Key figures – at a glance

So, as at 31 January 2021, we currently have:

  • 5.26m members
  • 98,000 employer accounts
  • £12.87bn assets under management

Recorded Online Update

We especially recognise the importance of giving you, our members, a voice to ask the pension questions that really matter. This is where our Recorded Online Update comes in.

In this video update, you’ll hear directly from me, and those who help look after your pension savings, on some of the key topics that are important for you to consider. Our video is split into sections, so you can watch it all in one go or by topic.

Based on the questions you’ve asked, the update covers:

  • Consolidation – combining pensions
  • Responsible investment
  • Protecting your pension

And more…

Don’t miss out – watch our Recorded Online Update video.

We hope you find this update useful and look forward to sharing our next update with you in 2022.

Discover our communications toolkit

What can be done to educate staff about their workplace pension? How can you increase understanding of staff benefits? Investing in your employees’ pension can help boost staff retention in an ever-changing financial climate. So, why not start the conversation? Members of our Relationship Management team at The People’s Pension will explore these topics in our new webinar series.

The truth is – workplace pensions matter to employees, but many just don’t have the confidence to engage with it.

Our YouGov study* into employer and employee attitudes to workplace pensions told us that:

  • 83% of employees with a workplace pension value it
  • 69% of employees think that pensions are important when looking for a new job
  • Over 50% would increase their pension contributions if their employer did

Powerful numbers.

In this webinar, we’ll also talk about how our easy-to-use communications toolkit can help you to develop an effective engagement plan – with templated campaign schedules, warm-up emails and letters, posters, WhatsApp templates and much more…

Webinar Highlights

  • The workplace pension is important – it matters to employees. Why not tell them about all the great things you can offer them?
  • Employee benefits – from supplementing the state pension to employer contributions
  • Take a simple approach to engagement – we can help you develop targeted, powerful and personal communications
  • How our communications toolkit can help –our handy toolkit offers a variety of resources for your needs
  • Creating your online account– how to sign up and receive dedicated support

To discover what our communications toolkit can do for you and see what our webinars will cover, take a look at our short toolkit animation video.

You can also read engaging staff with their pensions by Dave Lunt, Head of Business Development at The People’s Pension, for even more useful tips.

Join our online events for more on staff engagement

This year we’re running a series of online events that’ll explore the benefits of engaging your staff with key pension topics, and how to make best use of the tools and online resources available.
If you’re interested, please email us at RMM@bandce.co.uk or call 0333 230 1309.

*On behalf of The People’s Pension, YouGov carried out online surveys with 500 human resources decision makers and over 1,000 employees in the UK, between 31 August and 8 September 2017.

Retirement savers committed to saving for a pension

The majority (82 per cent) of UK retirement savers do not appear to have made any changes to their pension, despite the fact more than four in ten workers (45 per cent) have been impacted by the coronavirus pandemic in some way, a new survey has indicated.

According to research from leading workplace pension provider The People’s Pension1, conducted by YouGov, only three per cent2 of those questioned who have a pension said they had stopped their pension contributions altogether during the past seven months, while just two per cent said that they had withdrawn money from their pension, even though the country has experienced its biggest slump since records began and the recent rise in unemployment was the biggest in 11 years3.

The survey also reveals that:

  • Two per cent have cut back pension contributions since the UK went into lockdown in March 2020
  • A further two per cent had increased their contributions
  • Approximately one in seven (14 per cent) have checked the value of their pensions savings in the past seven months

The same research also reveals that 45 per cent of UK workers’ jobs have been affected by coronavirus in some way, with 15 per cent of those taking part in the survey having been furloughed at some point during 2020. Eight per cent of those questioned said their hours had been reduced, with five per cent saying that they had to take a pay cut 2.

Phil Brown, director of policy at The People’s Pension, said: “This has been the most difficult year that most of us can remember, with the fallout from the pandemic having an impact on almost everything that we do. Despite the financial hardship that coronavirus has caused, this national survey confirms what our data has shown us throughout; that it has had very little impact on pension saving.

“Even though there were early fears to the contrary, workplace pension saving through automatic enrolment has held up very well during 2020, confirming its status as one of the most successful Government policies of the 21st Century. This research serves as a timely reminder of how much value millions of workers place on saving for their retirement.”

The survey also revealed that the pandemic had prompted one per cent to delay their retirement plans, while one per cent of all UK adults with a pension retired earlier than they had anticipated.

ENDS

Engaging staff with their pensions – keep it simple

The job offers are accepted, new starters join the ranks of a company and they go into their workplace pension scheme. Brilliant – job done! In fact, it’s just the start. Many people don’t feel they understand or have the confidence to engage with their pension, and not just new joiners.

Over the last 6 months, we’ve all felt the effects of the coronavirus pandemic and the challenges of lockdown. After a shock like that, people may be feeling uncertain, they might have spent time on furlough and decided to stop paying into their pensions for a while.

Key role for advisers to bridge the gaps

Advisers play an essential part in supporting employers to help staff see the value of their pension. They can also help to coordinate conversations that help employees realise the value of this important benefit and provide better financial planning to support them on their journey.  Additionally, spending time with an employer to really understand their culture, and the day-to-day issues they face – especially staffing related – is the foundation needed to build a successful pensions engagement plan in support of an employer’s business ambitions.

HR teams are likely to be faced with lots of enquiries from employees about their pensions, but in fact advisers often support them by highlighting how much information members can get quickly and easily themselves by going online.

By registering online, employees can ensure their details are always up to date, allowing providers to engage and support with simple tools to help them take control and plan for their financial futures.

For example, completing online beneficiary nominations helps avoid potential complications and distress between a member’s loved ones and their employer’s HR department if they die before taking their pension – especially if their life circumstances are complex. And encouraging pot consolidation to simplify arrangements, and potentially benefit from lower management costs, can also demonstrate the value of their workplace pension.

Keep it simple and flexible

A key lesson from industry research is that most members (and employers) want things to be simple and don’t want too much complex information. Staff are also more likely to read information sent directly from their employer rather than a pension provider. According to the latest The People’s Pension Customer Barometer1, 97% of employers said having a simple approach to communications was important.

Flexibility is key to communicating simple messages for employees who just want the comfort of knowing support is there, as well as for colleagues who want to delve into all the detail and potential options.  

At The People’s Pension, we avoid jargon in our communications, using everyday language to make information more accessible. Our website provides key information and facilities to amend personal details, nominate beneficiaries, change fund choice and retirement age, whilst signposting supports decision making and appropriate pot consolidation.

Our communications toolkit offers advisers a variety of materials when developing an effective engagement plan with:

  • templated campaign schedules
  • warm-up emails and letters
  • posters, booklets
  • payslip messaging
  • and signposting to online animations and videos guides.

So, when it comes to engaging staff with their pensions, it’s all about keeping it simple. We can all work together to make a positive difference by developing a successful roadmap which can help reduce HR time, increase understanding and appreciation of staff benefits such as pensions, enable employees to take care of simple queries, and build confidence to know where to go for support when decisions need to be made.

Join our online events for more on staff engagement

This autumn we’re running online events exploring the benefits of engaging staff on pension issues and how to make best use of available material and online resources. If you’re interested, email us at RRM@bandce.co.uk or call 0333 230 1309.

All it takes is a conversation

It’s Dementia Action Week 2019 and the Alzheimer’s Society’s brilliant campaign (#DAW2019 #AskUsAnything) has inspired me to share my story of becoming a Dementia Friend and Champion.

With 4 Dementia Champions and at least 50 Dementia Friends colleagues at The People’s Pension, we think this is a great way of looking out for our customers, our colleagues and their family and friends. Dementia Friends is the biggest ever initiative to change people’s perceptions of dementia.

All walks of life

So, back in October last year I used one of my volunteering days (at B&CE, provider of The People’s Pension) to attend an Alzheimer’s Society Dementia Champion induction session in Brighton. What an amazing day, learning something new with a lovely group of people from all walks of life. It was both interesting and inspiring to hear why everyone in the group had chosen to be there.

Our group, ready to learn more about dementia, included a front of house theatre manager, several people from social care groups and Sussex care homes, a veterinary nurse passionate about the bond between humans and animals and a fabulous company called Pedal People – they take care home residents out in bike trailers to enjoy the wind in their hair and feel the sun on their faces. Lovely stuff.

Raising awareness of dementia

It really helps to understand the challenges people face living with dementia and the simple things we can do to help. Those challenges might include feeling anxious or stressed and fear of not being able to remember things, follow conversations or concentrate on anything, every-day tasks included.

Keeping people’s busy daily schedules in mind, especially our phone-based teams taking calls from customers, we produced an online training module. This means anyone can log on, at a time to suit their schedule, and learn more about dementia. It doesn’t mean they’ll become an expert – and they’re not expected to. But, by taking 5 or 10 minutes out of their day, the module gives them access to industry-specific online videos from the Alzheimer’s Society.

Small things, big difference

Every little counts and we’re delighted to be doing our bit towards creating dementia-friendly communities and transforming the way the nation thinks, acts and talks about dementia.

Too many people affected by dementia feel that society fails to understand the condition they live with. Dementia Friends help by raising awareness and understanding, so that people living with the condition can continue to live in the way they want. And who doesn’t deserve that.

Becoming a volunteer Dementia Friend means joining and becoming part of a social action movement.

The ‘action’ doesn’t have to be anything big, it might be something as simple as:

  • sharing something you’ve seen about dementia on social media
  • changing the language you use when talking to or about someone with dementia eg saying ‘living with dementia’ not ‘suffering with dementia’.

800,000 people in the UK live with dementia and this is expected to double in the next 40 years. Food for thought.

Go on, become a Dementia Friend.

Talking about money? It’s a generational thing

Would you happily chat to your colleagues – or your boss – about money? For many of us, the “m” word’s a taboo subject.

To make the best decisions about our future it’s crucial we’re able to talk about finances and understand the options. I’m therefore pleased to see that employers are starting to view financial wellbeing and retirement planning as part of their responsibility towards staff. It’s great news for creating a more open culture. But it seems there are some big differences between the generations when it comes to discussing money.

Employers step up to the plate

In my work for The People’s Pension, I speak to employers up and down the country. I’m seeing something of a groundswell of companies understanding the importance of financial education. Many are keen to go beyond simply enrolling their staff into pensions and making sure they’re aware of their pension (although that’s a great start of course). They’re encouraging their staff to actively engage with their retirement planning and think about the bigger financial picture.

How they do this varies, with employers taking a whole range of different approaches to turn the tables on apathy. Some are investing in late-life planning and communication programmes at various stages, providing life skills as well as paying salaries. Others don’t do much for people earlier on in their careers.

Preparing for retirement is seen not just as an issue for individuals but also for the wider business and jobs market. Some affluent older employees may be “rich” thanks to defined benefit pension schemes but this picture’s likely to change for future generations. Some workers face more challenging circumstances and end up in a position where they can’t afford to retire. If older employees stay forever and a day because they have no other choice, it can cause problems for businesses if it limits new talent coming through or leads to health issues.

Older but not wiser?

During a recent enlightening discussion with employers, they talked about the polarised attitudes of older and younger generations. Millennials are apparently happier to air their “dirty laundry” and have a different, more open attitude towards money than many of their older colleagues. I was pleasantly surprised to hear how younger staff at one company had loved financial awareness training and debt consolidation courses!

Millennials are also more interested in where their money is invested – something we should be mindful of as an industry when we consider things like Environmental, Social and Governance (ESG) criteria. For the majority of people thinking about their pensions, return on investment remains king but perhaps this perspective will evolve with future generations.

Stopping taboo by simply talking  

The importance of planning for a comfortable retirement is firmly entrenched in my mind. As an organisation, The People’s Pension is dedicated to creating simplicity for our customers and making sure both employers and employees understand how their pensions work and what all the sometimes scary jargon around financial products means for them. We want our customers to be as actively engaged with their pensions and retirement savings as possible. It’s great to see that many employers want the same for their staff.

I’ll do all I can to support this movement so more of us think about the future and are able to afford to retire or reduce our workloads when we choose to. Talking about money is a good place to start.

Steven is a former National Business Development Manager for B&CE, provider of The People’s Pension. He has been replaced by Duncan Reeves.