Credit should be given to a pensions industry that has mobilised almost overnight and adapted to such challenging circumstances, ensuring that scheme members are paid on time and critical member servicing continued.
The real challenges, however, are yet to be faced. Covid-19 has fundamentally changed the way we all live and work right now. It could also hail tectonic shifts in how the pensions industry operates in the future.
How to think ahead when you’re adapting to the here and now
Never before has the financial services sector been required to adapt so quickly to such unpredictable events.
Before focusing on pensions, let’s look at consumer banking where there have been dramatic changes in consumer behaviour in the last four months. Where banking leads, the rest of financial services often follow. Branches, that were already few and far between, have temporarily closed. ATM usage has dropped by 50%, the contactless limit rose to £45 and the use of financial apps increased by 72% across Europe.
Similar shifts have been made in pensions as administrators have introduced electronic verification for processing deaths when for example the next of kin is self-isolating. Electronic scans of a death certificate are now newly accepted. This, in turn, is being independently verified by using electronic searches on mortality screening databases.
More broadly the industry has accepted electronic signatures which until Covid-19 were widely accepted by much of the business world, with the exception of professional services and the property industry. Pensions scheme members who previously may have preferred cheques for pension payments have had to adapt to electronic transfer.
Behavioural change is the real challenge
Fuelled by necessity, while we have adapted quickly to such immediate transactional changes, much harder to grasp are the longer-term behavioural ones.
Historically financial services providers have often been slow to react to behavioural change in wider society when really there should be no difference between such services and online shopping for example. With shopping, those retailers that embraced online models have thrived, while others are falling by the wayside.
Other areas of our lives that we always assumed had to be face-to-face, such as a medical check-up, a complex business briefing or even an early morning fitness class are now being done virtually.
So why not the pensions industry? Virtual trustee meetings are the new normal. What about member briefings, financial advice, a discussion on a DB transfer etc?
Covid-19 has changed the way we work, probably forever, as administrators have been quick to adapt their customer service and delivery models.
Perhaps we will see the end of Dolly Parton’s ‘nine to five’ working hours when it comes to customer service, as a new generation of workers with life skills and experience enter the industry lured by flexible hours and no travel to the office.
Lockdown has proved the telephony and wider administration/workflow technology works so let’s see providers adapting their models so members can talk to someone about their pensions in the evening or at the weekend – if they wish to. Online pension portals are now common, as are traditional methods of communication – the goal has to be more choice for members about when and how they interact with their pensions provider/adviser.
Of course, home working is not for everyone, as people require the social contact, the learning and compatible environment provided in the office.
Whether full or part-time or on a rota basis, voluntary home working will increasingly be adopted by employers and employees, both forcing and facilitating change. Many more people will be far happier to work extended hours if they know they can do so from home. We would, therefore, anticipate the industry offering evening and weekend support as standard but recognise employers have to consider their existing property commitments, and also possible future claims if the home environment is not ideal from a working perspective.
As we bed in this new norm we can assume that many consumers, pension scheme members, trustees, sponsors and advisers will continue to offer video conferencing. This, in turn, will impact directly on how professional services providers such as IFAs can and should interact with their clients.
An obvious benefit of video conferencing is that it removes geographic limitations and as a result, we will inevitably see both individual consumers and corporate sponsors looking far wider for appropriate providers of advice.
Another dynamic will be a new level of competition from providers to apply technology at the forefront of the offering. Within the world of financial advice innovation will see multiple channels to serve clients which will rely less on face to face, if at all, and without resorting to robo advice.
As with many other industries, those providers that continue to invest in their people, systems and delivery models will be more resilient to future shocks, while providing higher levels of member service and satisfaction.
Our experience with both sponsors and administrators is that this investment has paid off and end of year processes, including pension increases, seem to have gone very smoothly over the period of disruption.
Adapt to now but re-engineer for the future
It can often take an external ‘shock’ to change custom and practice in an industry. Some pension providers have made huge strides and performed spectacularly well recently, but those who mistake Covid-19 as painful but temporary ‘blip’ are mistaken. 2020 will go down as the year when companies that re-engineered, evolved and kept the member at the heart of their model survived and even prospered, and those that didn’t found themselves with a mountain to climb.
Philip Dickinson is director at Cosan Consulting