As pensions minister Guy Opperman progresses his plans for a benefit statement ‘season’ – as a proposed short period each year during which all people with a UK pension will receive their annual benefit statements – what are the behaviours we would like future statements to foster in receivers of these annual round-up documents?
- Remember there are three contributors: Saving enough for a 30-year retirement is a mountain to climb. So, we need all three contributors to be pulling their weight to scale its peak.
The benefit statement should trigger thoughts about whether the member is getting the full employer match, or whether the employer will pay more in if they do. If the member is thinking of changing jobs, it should remind them to ask prospective new employers about their future pension scheme terms before they make up their mind to move.
Also, is the saver getting all their tax relief? For higher rate taxpayers in relief at source schemes, only half the tax relief is automatic, the rest is ‘claim it or lose it’.
For non-taxpayers in a net pay scheme, tax relief is denied. So, maybe pressure someone to get the so-called net pay anomaly sorted.
- Think where it’s invested: I’m a fan of Richard Curtis’ ‘Make My Money Matter’ campaign. We put retirement savings away for upwards of 40 years, which is plenty of time for providers to be doing something good with it.
There is a lot of ‘greenwashing’ going on out there, so as a saver I want more than an unsubstantiated net zero goal from the public companies I’m investing in. Where can I see the evidence of how my money is invested? What good is being done anywhere near where I live, or for any of the communities that I am part of?
- Question who is looking after it: They don’t put their logo on the benefit statement to make it look pretty. It’s to remind you who is stewarding this portion of your hard-earned that you have set aside for later years. I’ve heard people say their pension provider ‘seems alright’. Whoa! Evil Knievel thought the gap looked ‘alright’ when he tried to jump his bike over the fountains at Caesar’s Palace and he was well airborne before he found out otherwise!
Seeing that logo on your benefit statement should be the prompt to follow their hashtag on social media. Add them to your favourite social media platform and watch over the next year as they flit across your screen. You’ll hear what they have to say about themselves, and what their customers are saying too.
- Stop and think who this pension is for: Two-thirds of people live as couples, so don’t ask yourself “is this pension going to be enough for me?”, but “will it be enough for both of us?”. Sit down with your partner and their benefit statement and add the two together. The PLSA’s Retirement Living Standards show figures for both singles and couples to provide a benchmark for what you need to save to fund a reasonable standard of living in retirement. Why this is so important is that despite moves to greater gender equality, it is still usually the mother that shoulders most of the childcare burden.
So that they can start and bring up a family together, the mother often takes an income ‘hit for the team’, taking time out of the labour market, often returning part-time, maybe to a lower paid job closer to home and school. To repay this sacrifice, her other half must save for a pension for both of them.
- People like you are doing…?: Benefit statements feel too much like payslips to me. Devices like having your own password to open them reinforce the feeling that I’m on my own here, and how my savings are doing is a dirty little secret that I’m not encouraged to share with others.
A couple of years ago, I did some work around sharing savings progress, presenting to members information around ‘people like you have typically accumulated £x so far’ and ‘people like you usually put away £200 a month in a pension at age 50′. This sort of comparison data is all over things like Amazon, Etsy and eBay but sadly is often missing from financial services documentation.
Most savers don’t want to behave like an actuary and on receiving a benefit statement promptly build their own stochastic model to check they are on track. They’d much rather just be told that they are in line with their peers, or not as the case may be. It’s sad that our regulators don’t really facilitate this sort of communication.
What not to do
And finally, that one behaviour that we don’t want those receiving a benefit statement to do is…
Pick up the phone and call your pension provider: I’ve been talking to administrators about this, and the way they currently survive the gale of phone calls that benefit statements seem to prompt is to spread this potential deluge over several months. And if they are one of the third-party administrators that run several schemes, then they spread benefit statement delivery right through the year.
People should face up to the fact that making a phone call is a pretty selfish sort of thing to do. You are demanding attention now. And with the hidden threat that if you don’t answer me soon, I’ll hang up on the music and never deal with you again.
So please, if you get a benefit statement, keep the telephone for the items that really do need human interaction.
Use the provider’s web-based self-service facility for everything else. You may be surprised that, while you are in your provider’s site, you may be given an opportunity to learn something new as increasingly provider websites dangle an enticing invitation to engage a little deeper.
Adrian Boulding is director of retirement strategy at Dunstan Thomas