The rise of DC has led to a new generation of pensions leaders: younger, more diverse and better at communications Sara Benwell reports
Once upon a time, most people’s route into pensions began with a career as a lawyer or actuary. Those who became trustees tended to be towards the end of their working life and looking for a stopgap to and through retirement.
In many cases, this is still true. But the rise of defined contribution has created a new kind of pensions leader.
For one thing, people in pensions are getting younger. Alex Pocock, head of DC investment at Barnett Waddingham, believes that this is partly a result of more young people being members of DC schemes themselves.
He says: “This is a generalisation, but the average age of a DC trustee is probably lower than a defined benefit one if only because roles like member-nominated trustees are going to be taken from a younger workforce on the DC side.”
I can be sat in a group of trustees and I’ll be the only female”
Kim Nash, client director at PTL, believes that this greater diversity on boards is crucial for avoiding groupthink, and argues that younger people are more likely to understand the risks and concerns for auto-enrolled, DC savers.
She explains: “You need diversity in terms of how people think, their life experiences… and in DC that’s really important.
“If you’ve only ever known DB and you’ve got a nice comfortable DB pension waiting there, I don’t think you’re going to fully appreciate the risks that the members are taking, and what it actually would mean for them.”
However, she argues that the industry still has some way to go. She says: “I stood out when I joined the industry, and quite often I still do. I can be sat in a group of trustees and I’ll be the only female, and I’ll be at least two decades younger than them all.”
Here come the girls
One area where pensions leadership is starting to make considerable progress in diversity is the number of women in senior, high-profile positions.
Helen Forrest-Hall, policy lead for DB at the Pensions and Lifetime Savings Association, says: “As a relatively young woman working in pensions it’s always rather depressing to walk into yet another room of white, middle-aged men – but actually, I think certainly coming from the route into pensions I’ve taken, it’s an area where women are already quietly playing a much greater role than people might expect from what you might see at the big, set-piece conferences.
“When you look at key government departments, the key regulators, my current trade association – men, I think, are actually in danger of being outnumbered quite significantly.”
I’ve got skills, they’re multiplying
It’s not just the gender balance and average age of pensions professionals that are changing. A savings landscape where the member bears all the risk has also meant that future pensions leaders need different skills than in the past.
You’re trying to get people to avoid life-changing mistakes”
Pocock explains: “For most members in the DB world you could send a letter saying ‘this is what your pension is going to be’. That doesn’t require a huge amount of engagement or communication ability.
“But In the DC world where you’re trying to get people to actually make choices and avoid life-changing mistakes, those aspects become probably even more important than the analytical side of things.”
“We’ve had to try and get members to engage – they’ve got to think about what their options are and make decisions. That brings in a whole communications and engagement piece that perhaps was never there in DB.”
Nash agrees that communications and engagement skills are much more critical now. She says: “Under a DB scheme, people just thought: ‘I’ve a pension, and when I retire I’ll start getting paid a stream of money’, whereas DC doesn’t operate like that.
While softer skills are emerging as an important area, analytical thinking remains important, according to Mark Futcher, head of DC at Barnett Waddingham.
He points to the introduction of concepts such as value for money for members, which require scheme managers and consultants to carry out deep analytical evaluation to understand whether or not a scheme is up to scratch.
For Mel Duffield, head of product strategy and liaison at USS, it is the ability to marry together analytical and communications skills that embodies a 21st-century pensions leader.
She says: “Those who can combine an understanding of investment and technical pensions issues with strong communications skills, and an appreciation of member behaviour and psychology, are likely to succeed in future. It is these areas we at USS are giving significant thought to as we prepare to introduce the USS Investment Builder, our new DC offering.
“There is much that has been, and can still be, learned from those industries with more of a retail/consumer edge but those lessons need to be applied with care, and harnessed for the direct benefit of the member. Other factors, like a trend for consolidation within the sector, may demand that pension scheme managers and trustees have greater business and commercial expertise.”
“If you find yourself discussing RPI and CPI in the pub you should probably find yourself a job in pensions”
Forrest-Hall believes that an appreciation of the technical aspects of pensions is a good sign that someone is right for the industry.
She says: “I would define the key characteristic as someone who has a passion for good pension provision and in particular delights in all the technical detail that comes from being involved in pensions. I would say it truly helps to be a proper pensions geek, regardless of whether you have any professional qualifications that prove that.
“If you find yourself discussing the Retail Prices Index and Consumer Prices Index in the pub of an evening out of choice then you should probably find yourself a job in pensions.”
She also believes that the new generation of pensions leaders will need to have decisive leadership qualities. “It’s important, in terms of future leaders in pensions, that you have decision makers who are able to look more broadly at the world around them and spot how it is changing and how pensions may adapt to keep pace with that…
“It would be good to have more people who have pushed their heads above the parapet and have thought about more long-term trends and requirements.”
Workin’ nine to five
People coming into pensions are now being hired from different backgrounds. While there is still room for actuaries and lawyers, there are new routes in.
The key will be the inter-disciplinary communication”
Futcher gives the example of the latest round of hiring at Barnett Waddingham. He says: “We’re trying to recruit at the moment for consultants, and we’re finding it incredibly difficult to find people with the right skill set, which is that analytical ability, being able to take a step back, to challenge what’s in place, giving options and reviewing the whole of the market.”
The firm has just recruited a team member with a psychology background, and they are also looking at people with prior HR experience. Pocock says: “The key will be the inter-disciplinary communication in order to make sure that we’re pulling all of those strands together for the members.”
Children of the revolution
The new generation of pensions leaders needs to be young, diverse, excellent at communications and from non-traditional backgrounds. But how can the industry ensure that it attracts more of the right type of person?
For Nash, the solution is to keep an open mind. She says: “I think it’s being prepared to think outside the box a little bit – because we could just keep trudging on doing the same things that we’ve been doing, but that hasn’t really been working for members. People haven’t saved as much as they need to save. People don’t understand it, so to keep doing the same thing again is just silly, really.”
She believes that the industry needs to broaden its horizons, and crucially that industry heavyweights need to leave egos at the door.
To keep doing the same thing again is just silly”
Futcher believes that the industry has a bad reputation, and pensions as a brand needs rehabilitating. Pocock takes the slightly softer view that industry needs to do a better job of demonstrating the wider societal benefits it promotes.
He says: “It’s going to start becoming the acceptable side of the financial services industry – that you’re trying to help people with retirement, rather than trying to help people or corporations dodge tax or whatever it might be.
“You can see a personal calling aspect to helping people have comfortable retirements that perhaps you won’t get in some other aspects of financial services, and probably the way to go about attracting people is explaining to them the important work that they’re doing.”
Duffield agrees that it is important to stress the wider skill sets required by pensions to keep attracting new talent. She says: “I think there are still challenges in recruiting into DC-focused roles across the industry as it is a growing area – and I’ve heard that from a number of different sources. However, getting younger people to identify pensions as their career choice in their late teens and early 20s is a hard sell!
“I ‘fell’ into pensions in my mid-20s as a result of job rotation within the civil service and having a pensions/economics background then opened doors when moving out into the private sector.
You’re trying to help people with retirement, rather than trying to help people or corporations dodge tax”
“There are related areas thatyounger people do commonly aspire to work in, for example HR, or asset management, that have a strong pensions focus, so perhaps we need to start selling pensions in terms of the variety in the role and the broad range of areas and disciplines that it touches. Those outside of the sector may not realise these sorts of roles exist and that their skills and experience are relevant.”
She believes the industry could do more to identify structured career pathways that would, in turn, facilitate apprenticeship routes. USS is already starting to discuss apprenticeships with the The Pensions Management Institute.
Forrest-Hall suggests that a possible route forward could be to create some kind of structured pensions graduate programme, that would allow an individual to spend a bit of time in government doing pensions policy, some time with one of the regulators, time with a trade association and time with a provider or pensions scheme to understand how it’s run, and finally a role on a pensions trustee board.
She concludes: “If you could create a programme like that you would give someone an amazing grounding in pensions from a range of different perspectives. I think that if the industry wants to ensure we continue to legislate well, to regulate well, and to run good pensions schemes for the 21st century, then that’s the kind of idea we should be looking into.”