Pensions scheme members are paralysed by choice, but new comms solutions can help them make the right choices
Increased choice in defined contribution (DC) pension schemes has provided greater flexibility for DC members, and for members of defined benefit (DB) arrangements. But these new options have created challenges.
After listening to our clients, we realised that Freedom and Choice in pensions has made the process of choosing the right option a daunting and confusing process for many people approaching retirement. Many people are paralysed into doing nothing or sleepwalking into a familiar scheme pension when better outcomes could be available.
Employers investing significant sums into pension schemes knew they were not meeting their duty to support their retirees.
One thing for certain is that the shape of retirement is changing. We are also seeing a change in working patterns with many members looking to phase into their retirement rather than the traditional ‘carriage clock’ style of retirement of suddenly stopping full time employment and taking a pension.
This no longer matches the shape of income from a defined benefit scheme, meaning some members will need to transfer out of their scheme to take advantage of a more flexible option that compliments their part time earning and supports a more flexible approach to retirement.
Given all of this it’s clear that providing employees with robust education and guidance is more important than ever in supporting their financial wellbeing.
We recently conducted a survey of 2000 individuals aged 50-65 who have pension savings with their employer. The results were striking; 39% of respondents couldn’t estimate the value of their retirement savings. Given this statistic and the fact that the average person in the UK can now expect to change jobs up to 12 times during their career, its unsurprising that people need more support in understanding their pension savings.
Getting guidance is a good way for scheme members to improve their understanding of the options available to them, particularly for those with more complex financial circumstances. A staggering 65% of people also told us that they would like to see retirement planning advice become part of their benefits package, which is unsurprising as more and more people turn to their employer as a trusted source for support.
Last year, we worked alongside Pension Geeks, Scottish Widows and NEST on the annual Pension Awareness Tour to promote financial education and retirement awareness to members of the public at stop off points in key business areas around the country.
In October 2017 we also set off on our very own bespoke bus tour to introduce our Pension Decision Service (PDS) and visited some of our key clients to help answer their pension questions.
PDS supports organisations who want to ensure their employees make the most of their retirement funds. It is a powerful people-to-people guidance service – delivered by our Retirement Relationship team that no one else in the industry offers.
PDS embodies our brand values of Personal, Client Focused, Specialist and Innovative.
So what is the Pension Decision Service?
PDS supports the education of members through animated videos, print, digital information and at least one 30-45 minute guidance phone call with a Retirement Relationship Manager. Following the receipt of a retirement pack a member of our specialist team will contact the scheme member to talk through their options and the same manager will support the member throughout the process.
Following Freedom and Choice we still see around 70 per cent of retirement age members opting to take a scheme pension. The remaining 30 per cent will either defer their benefits by a few years or will seek a transfer value to take advantage of the new flexibilities to match their needs and aspirations.
Regulations stipulate that any transfer over £30,000 will require the member to obtain full regulated financial advice which can be provided by the JLT Wealth Management team or an advisor from unbiased.co.uk if the member does not have their own IFA.
Our Private Client service is also available for members with more complex cases i.e. multiple pensions or lifetime allowance issues.
In our drive to educate members to achieve better outcomes in retirement we continue to look ahead and develop our offering. We are excited about the opportunities that lie ahead in 2018.